PRODUCTS AND SOLUTIONS
Types of lease arrangements
A Finance Lease is an arrangement between our financier (the lessor) and the client (the lessee) to rent a particular piece of equipment over generally a set term with a predetermined residual value. The residual value is generally agreed upon in accordance with tax depreciation requirements.
The Benefits of a Finance Lease
The Lessor obtains legal ownership of the item to be leased, by paying the amount as advised on the supplier's invoice. The Lessee then has the use of the goods and pays rent for that use for the term of the lease contract. During the term of the lease agreement, the Lessee merely pays rent and does not obtain ownership or equity in the item they are leasing. Under a finance lease agreement, the Lessee is responsible for maintenance and running costs, insurance and registration fees for the leased item.
This type of agreement is particularly useful if there are multiple draw downs or when all parties will not be available every time new finance is considered.
The Benefits of a Master Lease
Identical to the benefits of a Finance Lease except that loan execution can be simplified to suit multiple transactions with one Master Agreement being signed, followed by underhand execution by an authorised signatory for subsequent drawdowns.
A Novated Lease is a three party arrangement where the user of the item (lessee) obtains use of the item by salary sacrifice (the employer reduces the employee's gross income) to pay rentals on behalf of the employee to the Lessor (our financier).
The Benefits of a Novated Lease
As the rentals (payment for the lease) come out of the employee's gross salary, the transaction can be tax effective. Employees can choose the car they want. A novated lease is portable and can be transferred to a new employer and the employee has unrestricted private use of the vehicle.
GST and Leases
Since July 2000 tax reform, this has become a topical issue. There is GST payable on lease payments and residuals as a Lease constitutes a "service" and not a "financial supply" (a bit like your Home Loan).
GST on asset acquisition is claimed by our financiers and the input tax credit is passed on by netting the amount to be financed. We highly recommend advice be obtained by our clients' Accountants or Financial Advisors on GST.
Commercial Hire Purchase
Commercial Hire Purchase is a facility where the customer can obtain goods by hiring them over the repayment term with a transfer of title to the customer on payment of the last rental. In most states a Hire Purchase can be 100% finance or with an optional or conditional deposit. Repayments can be structured and can be payable in advance or arrears. Commercial Hire Purchase differs to leasing as the customer gains equity in the asset over the term of the agreement or alternatively can decide on a mutually acceptable balloon payment.
Structured payments can be made anywhere in the repayment schedule. There are no limits on payments anywhere in the rental stream for Commercial Hire Purchase. This product's flexibility suits clients' varying cash flow.
The Benefits of a Commercial Hire Purchase
Enables you to have use of the asset without tying up the company's working capital. This means payments can be paid out of the additional profit generated by use of the goods, whilst keeping your cash flow healthy for additional expenses. You pay a fixed amount each month which helps you to budget effectively. It gives you ownership of the asset upon payment of the final instalment/ balloon. You can claim interest charges and depreciation, which allows you to offset the cost against your taxable profits thus reducing your tax bill.
GST and Commercial Hire Purchase
Since July 2000 tax reform, this has become a topical issue. There is no GST payable on monthly Hire Purchase payments or residuals as a Hire Purchase product constitutes a "financial supply" and not a "service".
GST on asset acquisition will be claimable by the hirer, however we highly recommend advice be obtained by our clients' Accountants or Financial Advisors on GST.
The Chattel Mortgage is an arrangement between the client (mortgagor) and our financier (mortgagee) where funds are advanced against chattels (goods) already owned or to be acquired by the client. Our financier secures the loan by registering a charge over the chattels.
The Benefits of Chattel Mortgage
The mortgagor owns the goods from the beginning of the contract, if neccessary, matching repayments with seasonal/ abnormal cash flow. Like Hire Purchase, you can claim interest and depreciation which allows you to offset the cost against taxable profits.
GST and Chattel Mortgage
Since July 2000 tax reform this has been a topical issue. There is no GST on Chattel Mortgage payments (like Hire Purchase). GST on asset acquisition can be claimed by the Hirer. It is our understanding GST can be claimed up-front on Chattel Mortgage irrespective of your GST classification ("Cash" or "Accrual"), however we highly recommend advice to be obtained by our clients' Accountants or Financial Advisors.
Letters of Credit
Due largely to globalisation, an increasing trend is appearing for our end-user clients to acquire equipment direct from an overseas manufacturer/source
This is particularly the case for those clients purchasing highly specialised equipment from Europe and United States, and for those clients acquiring heavy manufacturing machinery out of Asia.
In order to facilitate a direct purchase with the overseas party or parties, we are regularly establishing Bank-to-Bank Letters of Credit for the importation of such equipment. This facility is then negotiated on satisfactory delivery and sighting of goods into a term loan such as a Finance Lease, Commercial Hire Purchase or Chattel Mortgage.
Factoring (Cash Flow Finance)
Factoring or Cash Flow Finance is an innovative solution to rigid and tedious bank overdraft facilities whereby a business borrows money using its cash flows (or Accounts Receivable) as security.Generally, clients will be able to access between 70% to 90% of their approved accounts receivable.
Macquarie Commercial Finance is able to tailor an individual Cash Flow Finance solution for your business.
This facility is ideal for companies seeking a streamlined Head Office environment and allows your resources to be focused on increasing sales/production by outsourcing your sales ledger to us.
Companies who require a regular opportunity to maintain direct contact with their customers prefer this facility.This service will require the client to actively assist with invoice collection follow-up.
The factorer can provide cash advances against unpaid invoices but takes a backseat role which is not disclosed to your clients.
Many of our best clients come to us to finance rapid growth however there many types of other scenarios which will suit factoring, for example:
- Clients looking to separate their real estate from their financing requirement
- Management buy outs
- Company acquisitions
- Situations where one shareholder is looking to retire and remove their property security from the bank
- Companies looking for credit lines to facilitate letters of credit drawn in favour of overseas suppliers
- Companies looking for funds to enable them to capitalise on settlement discounts offered by suppliers
The following are some of the more common industries in which we can assist:
- Temporary Labour Hire
- Printing & related industries
- Computer equipment& computer peripherals
- Engineering Suppliers
- Distributors & Wholesalers
- Transport & Courier operations
- Textile, Clothing and Footwear industries
- Giftware and Promotional products industries
- Suppliers of building products