Baker Affleck

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Warning for business owners:
Get advice before you seek finance

Small businesses hoping to take advantage of the 50% tax break for purchases of new equipment should seek professional advice about their finance options or risk damaging their bottom line.

People should seek professional taxation guidance addressing tax implications and benefits, then complile a number of quotes from several major financiers. This allows the client to recognise their options and ensure a good outcome.

Some finance brokers quote low interest rates. However, it is important to address the whole picture. Glenn says, "To compare like with like, it is important that you understand the establishment costs, monthly repayments, residual payment and finance term before making any decisions."

Every business has a different financial position, so it's not possible to generalise about the most effective way to finance your equipment. To help you make your decision, you need to consider the different types of finance available.

Further points to consider

  1. Unused lines of credit. Leasing and asset purchase may represent another type of financial commitment; however in most cases additional security is not required. This leaves your working capital and lines of credit free for other business investment opportunities.
  2. Cash-flow. 100% finance is available. Flexible repayment structures can be arranged to suit irregular cash flows.
  3. Known and fixed costs. Most lease and asset purchase transactions are written on a fixed-term basis, thus ensuring that the future borrowing costs will be known in advance. Unfortunately, many business enterprises have been caught in the situation of purchasing major capital equipment using lines of credit or overdrafts that are not guaranteed to be available for any length of time.
  4. Convenient. Most financiers have standardised documentation and a quick approval process to allow funds to be raised in a matter of days.
  5. Partnerships/joint ventures. Leasing, in particular, is a convenient way to share costs of equipment acquisition in a partnership or joint venture, thereby minimising the capital contributions of the partners.
  6. Almost anything can be leased or asset purchased so long as the asset is to be used (at least 50%) to earn assessable income.
  7. Almost anyone can lease. Applicants can be Companies, Sole Traders, Trusts, Partnerships or Individuals. You must have equity in a home and have tax returns for the last two years for your business.

"If your business requires new equipment, you cannot afford not to ask around for a variety of quotes that help you make that  important business decision - whether to buy, lease or asset purchase," says Glenn.

For more information contact Glenn or Deborah from Baker Affleck Financial Solutions.

 

Baker Affleck
Level 1, Solac House, 76 Appel Street, Surfers Paradise QLD 4217
PO Box 634, Surfers Paradise QLD 4217
Phone: (07) 5538 3088 • Fax: (07) 5539 0805 • Email: admin@bakeraffleck.com