Commercial hire purchase is a standard form of equipment finance. Often called CHP, the concept is similar to a standard leasing agreement, with the exception that you will be able to claim allowable equipment depreciation and interest on your taxes. With the vast selection of equipment finance solutions, how do you know if CHP is the right choice for you? Here is a basic guide to present you with the information you will need to consider.
Payment Structures:
Typically with CHP, you will be able to structure your payments so there will be no money owing at the end of the term. However, it may be possible to reduce monthly payments and offset the cost by having a balloon payment at the end of the agreement. Generally, CHP has a great deal of flexibility, allowing you to tailor the plan to suit the needs of your business.
Advantages of CHP:
With this form of equipment finance Perth business owners can enjoy a number of distinct benefits. Unlike a standard finance lease, there is generally no restrictions applied to the structure of the terms. This means that you can tailor the agreement as needed. Additionally, the tax ownership remains with the lessee. This can allow businesses to claim for depreciation and interest expense on tax paperwork.
Disadvantage of CHP:
As with any financial product, there are some potential disadvantages which will need to be considered. If your business uses the “cash” accounting method, you may need to claim additional taxes during the loan period. Additionally, CHP tends to be more costly in the long term, and you will not be able to claim the equipment as an asset on your balance sheet.
Should You Choose CHP?
There is no simple answer to this question. The choice of equipment finance options will depend greatly on the specific characteristics of your business. You will need to consider whether the equipment will need to be upgraded after several years, or whether lifetime ownership would be beneficial. If the equipment does not depreciation and is essential for everyday use in your business, it may be more advisable to consider purchasing rather than leasing the equipment. However, there are some tax advantages to leasing, which are not available if you buy the equipment. If you are unsure about which option is best for you, it is a good idea to speak with your tax advisor, who will be able to help you determine which option offers the most financial benefit for your business.
If you would like to explore your options for equipment finance, Perth business owners should speak to us. At All Credit, we have access to a wide range of specialist lenders including those offering equipment finance. Our team of advisors is here to answer any queries and would be delighted to discuss the options available for your business. We would be delighted to help you to find the equipment finance solutions best suited to the requirements of your business and help you to achieve your business goals.
