A chattel mortgage is an agreement that allows the borrower to take ownership of goods on delivery but the financier secures a loan by registering a charge over them.
Chattel mortgage facilities can be used to fund any type of equipment, whether new or used. Funding can be for any amount up to 100% of the equipment cost, including GST. It is a flexible product that allows an unlimited amount of deposit to be made by way of cash or trade-in.
Borrowers can choose either full repayment over the term or a balloon (lump sum) payment at the end, which can reduce the monthly commitment and assist cash flow. A chattel mortgage can also provide substantial tax benefits relating to GST.
Benefits of Chattel Mortgage
You can use the Vehicle or Equipment immediately, with the benefit of using the new purchase in the business without the capital outlay. This is paramount for small business as cash flow is king. Allowing you to pay for the use of the item while spanning the payments across it’s usable life is just smart business.
With Chattel Mortgage, there may be very little or no money down. Only the first month’s payment might be due at the time of the lease. Since a chattel mortgage does not require a down payment, it is equivalent to 100% financing. That means that you will have more money to invest in other revenue-generating activities.
Optimise Your Cash Flow
Optimisation of cash flow while minimising the impact of the GST, which is not applicable to individual repayments. Provided borrowers are registered for the GST, they will be able to claim the entire GST portion of the purchase price as an input tax credit (ITC) immediately on their next business activity statement (BAS).
Treatment of GST
GST is treated according to the type of financing used and may also play a part in the decision process for determining the type of financing facility to be used.
The GST is also applied to the purchase price but can be claimed
upfront if the purchaser is registered for the GST.