The Australian freight transport industry plays an integral part in keeping the economy on the move. Road Freight alone contributes 35% of the total freight and generates billions in dollars. Knowing the right financing options that are available for your transport business can catapult your transport business into the right arena without breaking the bank.Whether you are a one-man show with one truck that delivers goods or a rolling fleet of transport vehicles, the success of your transport business will ride on choosing savvy financing. T&L News has teamed up with Savvy, BRW’s fastest growing financial company in 2015, to give you four unsecured financing options for your business.
- Chattel Mortgage
If you are looking to own your vehicle outright a chattel mortgage will be a financing option you would want to consider. Especially if you plan to use the vehicle for 50% of your business needs. It is a business finance product where you as an owner of the vehicle can use the same vehicle as security for a loan.
However, to get more out of the loan you must compare interest rate and features. “Interest rates depend largely on your credit history, so before you apply for a loan check your credit report,” advises CEO of Savvy Bill Tsouvalas.
Once you have paid off the chattel mortgage the title to the vehicle will then belong to you. The benefits of chattel mortgages is that it is tax effective. You can claim GST from your purchase on your next BAS statement.
- Commercial Hire Purchases
Commercial Hire Purchases are perfect for business people who want something that comes with flexible payments and won’t interrupt their cash flow. According to the Truck Industry Council, heavy vehicle and equipment rentals generated an estimated $3 billion during the financial year of 2013 – 2014 alone.
When it comes to commercial hire purchase, a lender will get into an agreement to purchase a vehicle on your behalf and hire it out for an agreed period of time, which is usually between 1 – 5 years, with a fixed monthly payment. This works great for people who want to factor the loan payment into their bookkeeping. The fixed interest rate means that you can expect little to no changes to the amount you will pay until the end of the period of the agreement. You will have to keep in mind to take care of ongoing costs of the vehicles such as insurance, maintenance and registration.
- Finance Lease
Finance lease is synonymous with being cost-effective. Leasing a vehicle might be a good choice if you are considering on using a new truck regularly, and you are taking on short to medium term projects. Financial leases come with a fixed-term repayment during the term of the lease, which makes it easier for your accountant to subtract from the expenses of your business. It can also allow you to offset payments against taxable income, as these can be claimed as business expenses. The benefit of a financial lease is that it comes with the option for you to buy the truck at the end of the lease.
Mr Tsouvalas further adds that “if you want flexibility, leasing may be better. It is always best to ask a financial advisor before making a hard decision.”
You might have a loan that you are currently using to finance your transport business, but if it is costing you more than what you are getting in return there is always the option to refinance your loan. Refinancing can be cost-effective when it comes to finding a loan that offers the same features, or better, with a much competitive interest rate. It is advisable that you always check the interest rate on your loan to ensure that you are getting the best value for your money.