So we’ve decided it is timely for Finlease to make a move into Orange and have appointed Michael Abberton to head up our operation there. Michael is an entrenched Orange identity and has worked in all areas including equipment finance, commercial property finance and more. In his previous role, Michael has been servicing a broad region from Bourke to Lithgow. As vast as this territory may be, we’re able to reach out well beyond the region giving local businesses access to financiers all around the country. This includes the critical second tier regional banks and specialist lenders who are typically more disposed to small to medium business finance.

So whether it’s equipment finance, fleet leasing, IT rentals or property finance that is required, Finlease has the clout of having over $350 million worth on funds on loan annually to secure the fund. We’re really excited about Orange and will do our utmost to contribute to the growth of this vibrant area.

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Mark O’Donoghue
Finlease (Aust) Pty Ltd
1300 346 532

One thing we at Finlease have been working very hard on is seeking better whole of banking outcomes for our clients. We’re going further than simply handling business finance or equipment loans, but looking at our clients’ day to day banking needs.

When it comes to seeking a better relationship with your bank, we see it much like a marriage. What we’re doing is ensuring our clients have the right “prenuptial agreement” upfront which helps to keep the marriage on track.

The right banking solutions can make running your business more productive, less restrictive and with a lot less red tape. The way I see it, not all finance brokers are playing such a role for their clients, as many prefer to simply provide business finance and credit facilities. But our relationships with our clients have been in place for many years – some for decades. So we can use this knowledge base to secure better whole of banking outcomes for small to medium sized business operators. That’s something which will benefit not simply the businesses themselves, but will indirectly help the broader economy as well.”

Mark O’Donoghue
Finlease (Aust) Pty Ltd
1300 346 532

Generally speaking banks lend to home purchasers, credit card users and businesses. Banks source their funds from customer deposits, the wholesale market and securitisation. These funds come at a cost and depend on a range of factors including the cash rate, competition, international events, the bank’s own credit rating and the availability of funds from the wholesale market (both domestically and internationally).

Since the Global Financial Crisis (GFC) began in late 2007 the banks cost of funds have increased over and above what was previously considered the norm when it comes to the price of fixed rate funding today. This cost increase is primarily due to less investors willing to make funds available for the banks to borrow, and that in turn forces the price or cost to borrow higher (bank margins are a discussion for another day).

Generally speaking Bank Bills are the cheapest form of short term funding (up to 180 days) for business finance. The published bank bill rate does not include the banks margin. Depending on what you use the money for will determine the margin a bank will apply taking into account such factors as term, strength of client, and supporting security. When we look at longer term rates say, 3 and 5 year money, we start to look at what is called the Swap Rate as guide to what bank’s cost of funds are doing. 

When it comes to equipment finance we are still very fortunate in the way in which banks lend money. By this I mean when compared to arranging finance for a house or commercial property you are required to come up with 20-30% deposit before the bank will lend the money + all the associated legal and government costs associated with that purchase.

In contrast, equipment finance more often than not is 100% financed (i.e. no deposit). The irony here is that whilst a deposit is required on property finance and property is considered an appreciating asset the reverse applies to equipment. From the moment a new piece equipment or motor vehicle is delivered the value drops by at least 20% in most cases and continues to slide until it reaches a stable market value. The risk factor for a bank when lending on equipment dictates that their return on money will need to be higher than that on a property loan due to the risk factor. The secondary market for a home is much more buoyant (less risk) as everybody needs a home whereas not everybody needs a second hand piece of equipment. If the shoe was on the other foot would you be asking for the same return for these two different types of investments?

Another factor contributing to why interest rates differ between home loan and equipment finance rates, the fact that the money is sourced from different channels by the banks to on-lend to the business community. Home loan funding is mostly done on a variable rate which is funded on day to day, month to month, quarter to quarter funding programs. Equipment rates however are based on medium to longer term funding programs and the rates on equipment are on a fixed rate and a fixed term structure. This method gives rise to why the rates are higher on this fact alone let alone where the bank sources it money from. Interestingly, the Commonwealth Bank website currently has on offer a term deposit rate of 7% for a 5 year term. This means that the bank would need to lend out at rates of around 9% + in order to meet its obligation on that term deposit and make a return.

I am consistently seeing 5 year fixed rates for commercial property advertised around the 8.95% mark so equipment finance rates in the 9% + range is looking very attractive when all is said and done.

For whatever comfort the following comment is worth, it is interesting to note that according to the statistics provided to the Australian Bankers Association “data to early 2009 shows that bank’s interest rate margins remain at low levels. In late 1995, bank margins were almost 4% and are now 2.15%.” It would appear in more recent times that this margin is now on the way up again.

In the second half of the year I’ll review what’s happening with equipment finance rates and the general sentiment amongst lenders.

Mark O’Donoghue
Finlease Australia Pty Ltd
P. 1300 346 532

• the perceived lack of funding available from the major banks
• withdrawal of multinational banks has also limited funding
• increased competition for available funds
• shorter time in a given positions by ‘relationship managers’, meaning they have little chance to understand how a particular business is tracking
• financiers are seeking more information in finance applications, which is time consuming for small business operators

This tougher climate provides further justification for enlisting the services of a specialist business finance broker to serve as your advocate in sourcing equipment finance or in fact all forms of business finance.”

Mark O’Donoghue
Finlease (Aust) Pty Ltd
1300 FINLEASE (346 532)

Sourcing business finance after the global meltdown.

“The global finance crisis may be over but the drama continues for small business. Surprisingly, credit is more difficult for small businesses than before the GFC. So when you’re after equipment finance, you’ll need more things working in your favour than ever. 

Information is the currency that the financiers want, and that means assembling the data which presents you in the best light. The financiers will want to be convinced of your ability to repay the loan based on historical figures and to know how the equipment you are purchasing will improve your situation. They’ll also want an account of your assets and liabilities, your working capital position and will need to be convinced that the equipment you are purchasing makes sound business sense. We continue to recommend that you spread your equipment loans across different financiers, especially in this more difficult climate.

Research we’ve seen at Finlease suggests that larger businesses are happier than ever with the performance of their bank, smaller businesses are less than impressed.

So if small business is the engine that is driving the economy as the government tells us, where is the fuel coming from? Rest assured we at Finlease are here to help with the equipment finance you need to refuel your engine and get your business accelerating again.

Mark O’Donoghue
1300 FINLEASE (346 532)
Finlease (Aust) Pty Ltd

• Over half a dozen larger boats on the marina that we were about to finance with boat loans or were about to settle.
• Manufacturers like Maritimo reported it to be their best show in 3 years.
• We’re seeing the first signs of the broader boat finance community dipping its feet back into the water and feeling more comfortable with lending money in the marine area.
• This was the first show in 2 years where we were able to access an increased choice of financiers for boat loans.
• We reiterate how important it is to present the right case to those financiers with a well prepared detailed boat finance submission, otherwise you could miss the boat and not make it past first base.

We look forward to seeing you at the Sydney International Boat Show, (29th July – 2nd August ) where we expect to see an even brighter mood.  Visit our floating houseboat, on the northerly corner of the marina adjacent to the Pyrmont Bridge.”

Mark O’Dongohue
Finlease (Aust) Pty Ltd
1300 346 532

For businesses which took advantage of the Federal Government’s 30% Investment Allowances, make sure that if you ordered vehicles or equipment, they are installed and ready for use by June 30 this year. Another word of caution, make sure you have the right equipment finance structure. We’re recommending an Equitable Chattel Mortgage  as the only business finance structure to consider, otherwise you run the risk of having your investment allowance claim disallowed.

It’s worth looking at the current situation with your business finance and considering whether there can be tax saving opportunities. For instance, you may be able to pre pay up to 12 months interest on equipment finance or vehicle finance. Talk to your accountant or Finlease about how managing your business finance differently can actually save you money.

If you like a bargain, now is a good time to put equipment finance approvals in place in anticipation of the typical end of financial year run out sales many vehicle and equipment dealers tend to run. Be sure to get your business finance in place early to ensure your approval comes through in time to take advantage of the savings that can be made.”

Mark O’Donoghue
1300 FINLEASE (346 532)
Finlease (Aust) Pty Ltd

• You choose the make, model, colour and options
• Our car buying service searches for the best deal
• Large buying power gives us the clout to secure a better deal
• Saves you time and money
• Finlease will secure competitive car loan rates and flexible terms
• You won’t need to leave your office or workplace, we’ll bring the vehicle to you

The Finlease car buying service is just another way we at Finlease are seeking to go further for our clients, providing more than just car finance, but a total solution. If you’re looking at upgrading your company car or commercial, feel free to chat with us any time to find out more.”

Mark O’Donoghue
1300 FINLEASE (346 532)
Finlease (Aust) Pty Ltd

It’s fairly easy to understand what vehicles and equipment are eligible, and what relevant deadlines must be met, yet less has been spoken about the finance structure you’ll need. Bear in mind that if you fund your purchase with a Lease or Commercial Hire Purchase, you could have your Investment Allowance claim disallowed, so be wary of a dealer or supplier who is recommending such a solution.

We at Finlease have advised our clients that a ‘Chattel Mortgage’ is the preferred structure and have even gone one step further to make sure you can claim the relevant Investment Allowance. We’re recommending that the finance is structured as an ‘Equitable’ Chattel Mortgage, which operates only by way of a charge over the asset so that you remain the legal owner of the vehicle or equipment you are purchasing. Your Finlease broker will be happy to discuss how that works in practice, it’s really quite straight forward.

At Finlease, we have the correct ‘Equitable Chattel Mortgage’ documentation which has been amended to ensure it complies with the ATO guidelines.

Best thing to do is let us handle the complex issues regarding the finance structure, so that you can focus on running your business and sourcing the equipment you need to get things operating more efficiently.”

Mark O’Donoghue
1300 FINLEASE (346 532)
www.finlease.com.au

This has been a carefully planned strategic move and has only been made possible through teaming up with a like-minded organisation. We’ve formed a strategic alliance with a local company AGF Charter, who are a terrific team of individuals.

Coincidentally they’ve been in operation for 20 years, about the same time as Finlease, and service similar types of businesses. More importantly, we share the same work ethic of actively managing the whole finance application-to-settlement process. This is what separates Finlease from the major banks, and from the research we’ve seen lately, service is what the market is crying out for, especially amongst small to medium sized businesses.

The move into WA is particularly important to us. WA will see significant prosperity in the coming years with the major resource projects that are underway, yet it won’t be without growing pains. Contractors and small business servicing these projects will need the services of a pro-active finance broker as credit is still particularly tight.

In addition, this extra branch also gives us truly nationwide coverage, which is important especially to our clients which operate across several states, as it means we can offer their branch in Perth, for instance, the same level of service as they currently enjoy in the other major cities.”

Mark O’Donoghue
1300 FINLEASE (346 532)
www.finlease.com.au