A REAL Solution
Many of you are well aware of what equipment finance (Chattel Mortgage, Lease, Hire Purchase) is and the role it plays within your business. Equipment Finance facilities provide advantages to business over cash purchases or utilising overdraft facilities for a number of reasons.
However, something you may not be aware of is the risk appetite lenders have adopted in recent times associated with equipment finance. A recent industry review has discovered the equipment finance space offers a lower risk to lenders than previously thought. The review uncovered the vast majority of business operators placed a greater level of importance to make repayments to equipment finance facilities than what was once considered ‘safe finance’ which includes owner occupied home loans.
The philosophy adopted by business owners is to lose the family home through repossession means starting again and possibly living with relatives. However to lose an income generating asset such a truck or piece of earthmoving equipment would mean bankruptcy and ultimately losing the family home in any case.
The interesting outcome to this review is how the banking industry has reacted. Many lenders now have streamlined application processes of a single page based exclusively on past repayment history and approvals can be in place within 90 minutes of application.
Several mainstream lenders have allowed their appetite for equipment finance to extend even further into pricing. Previously, Low Doc applicants were subject to higher interest rates and increased application fees. With the finance industry being extremely competitive lenders have been forced to offer more attractive packages to consumer and the equipment finance space shows little level of risk to lenders.
Eligible business operators can enjoy the same product pricing for their equipment finance needs as full doc applicants without producing full financial reports or being penalised by rate or upfront fees.