When you need new equipment to make your business more productive there is a lot to consider. New or second hand? Which brand is best? What about re-sale? Among the most important is the best way to finance the purchase.
NAB Agribusiness General Manager Khan Horne says the bank is seeing a lot interest from customers looking to upgrade at least some of their equipment, and he is urging them to carefully consider all options available to finance the purchases.
“We’ve seen a growing need to provide even more tailored products for farmers to meet their individual circumstances, given the cyclical nature of cashflow.
“If you make most of your sales in summer, you should be able to make most of your repayments at this time, and have the repayments for the rest of the year adjusted accordingly.
“You also shouldn’t have to pay a deposit on your new purchase,” he said.
Equipment finance offerings by banks are becoming more flexible, and matching repayments to periods of higher cashflow is a smart way to get the equipment that your business needs.
“Remember there is more than one way to finance new equipment, and outright purchase is not always the best way to use the capital you have,” said Mr Horne.
“Generally, it is good business practice to have a balanced mix of debt and equity and it’s important to consider all your options. A finance lease or hire purchase can also be used to fund your equipment needs.”
There are several tax implications to consider where new plant and equipment produce assessable income and it’s important to seek independent advice from your accountant or financial adviser.
A finance lease can help a business budget with certainty. The bank purchases the equipment and rents it to the business for an agreed period at a fixed rental rate. At the end of the term, the leaser has the option to return the equipment to NAB, apply to refinance the equipment, or make an offer to purchase it outright.
Hire purchase is a useful option if you would eventually like to own the equipment. It is similar to a finance lease, although at the end of the finance period, the business owns the equipment.
Buying new plant and equipment can be expensive and it’s important to remember there are a number of ways to finance purchases. As with all important business decisions it’s a good idea to get expert advice and investigate what will work best for your situation.
NAB Agribusiness has leasing specialists that can work with you, your financial adviser and your local Agribusiness Manager to help you structure a facility that best suits your needs.
Agribusiness View provides the latest insights from NAB Agribusiness. Visit nab.com.au/agriview to sign up as well as to find the contact details for your nearest NAB Agribusiness Manager.
Important Note: Any advice in this editorial has been prepared without taking into account your objectives, financial situation and needs. Before acting on this advice, you should consider its appropriateness to you.
About NAB Agribusiness
National Australia Bank (NAB) Agribusiness employs more than 620 agribusiness banking specialists in 110 metropolitan and regional locations Australia-wide. The Agribusiness team use their local and industry knowledge to better understand the unique environmental and economic needs of farmers and businesses beyond the farm gate – whether they provide inputs into agriculture or process, distribute or market primary produce. NAB’s flexible range of agribusiness products and services is delivered by listening to and working with customers, to tailor the best packages and advice for their businesses. For further information please visit www.nab.com.au/agribusiness.