Maximising savings from financing manufacturing equipment

Thanks to the Morrison Government pledging $1.5 billion to modernise the manufacturing industry through the Modern Manufacturing Strategy, confidence in bringing manufacturing back on shore is building. $107.2 million is being spent on creating resilient supply chains.

If your business is looking to on-shore its own supply chain and logistics, now is the time to purchase your equipment – be it IT, mining, energy, construction, or retail fit-outs.

With interest rates at a record low 0.1% and loans guaranteed by the government, Australian manufacturing businesses can take advantage of ultra-competitive chattel mortgages.

Savvy Managing Director and business finance expert Bill Tsouvalas says a chattel mortgage solution can prove to be a sustainable option for long-term asset purchases.

“As we know, long-term assets should be funded by long-term liabilities,” Bill said. “Right now, interest rates are at the bottom of the barrel. Securing funding for your long-term growth as more and more Australian businesses bring their supply chains on shore is not only cost-effective right now, but guaranteed by the government.”

These guarantees are given in the form of the SME Coronavirus Guarantee scheme. The Federal Government is guaranteeing loans for businesses up to $1 million in value. This theoretically means less jumping through hoops to get approved. Businesses can opt for five-year terms and some lenders may pass on an optional six-month repayment holiday.

“The best option is a chattel mortgage,” Bill said. “A chattel mortgage is a lien on an asset used for business purposes. Your business will take ownership immediately and gain access to a raft of tax incentives and write-offs.”

These write-offs include the Instant Asset Write-Off Scheme. It has been expanded to $150,000 until the 31st of December. Businesses can also claim the GST, interest paid, depreciation, and the fuel input tax credit, if their equipment is a vehicle.

A chattel mortgage also has numerous other accounting advantages, such as borrowing more than the agreed or market value of the equipment you intend to purchase.

“Amortising your installation costs, your labour costs, insurance, registration, or other operating costs to get your equipment up and running can also make a chattel mortgage a cash-flow neutral solution. If you’re buying servers, for example, software and off-site management can be factored into the loan and you can pay it off in instalments instead of using your operational cash. This streamlines your business and sets it up for long-term sustainable growth.”



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