FINANCE OPTIONS

Finance option

Equipment rental

What is it?

An agreement between you and a financier where the financier buys the equipment on your behalf and rents it back to you over a fixed term. At the end of the agreement you can give the equipment back to the financier, start another agreement or buy the equipment outright.

Features

Fixed interest rates
Flexible terms ranging from 12 to 60 months
Fixed monthly repayment amounts so you can budget for all costs in advance
Useful for equipment that has a short lifespan and is likely to be superseded soon
Option to choose a balloon payment at the end of the rental agreement, thereby reducing ongoing monthly repayments
You can claim your rental payments as a tax deduction
The equipment is “off the books” – that is, it’s not considered a business asset and the repayments aren’t classed as a business liability

Finance option

Asset lease

What is it?

The financier purchases the equipment on your behalf and then leases it back to you in return for fixed monthly repayments. When the lease comes to an end you can:

Start a new lease
Pay a “residual” to purchase the equipment
Sell the equipment
Return the equipment to the financier

Features

Gives you all the benefits of ownership
Fixed interest rates and fixed monthly repayments allow you to budget in advance
Potential to structure repayments to suit your cash flow situation, for example by including a residual on the lease
Lease payments can be claimed as tax deductions
The equipment is “off balance sheet”

Finance option

Chattel mortgage

What is it?

The financier lends you the money you need to buy gym equipment, with you taking ownership of that equipment straight away. The financier takes out a mortgage over the equipment as collateral for the loan. Once you’ve completed repayments, the mortgage is removed and you receive clear title to the equipment.

Features

Flexible terms available
Fixed interest rates and fixed monthly repayments allow you to budget in advance
You can pay a deposit to reduce the amount you borrow
Option to apply a residual to the contract to reduce your monthly repayments
If your business is registered for GST, you can claim the GST in the purchase price
You can claim the depreciation of the equipment as a tax deduction

Finance option

Rent/buy option

What is it?

You hire the gym equipment from the financier for a set period of time, for example 12 months. You then have the option to purchase the equipment at the end of the rental term or, if your business isn’t growing as planned, you can simply walk away.

Features

Allows you to try equipment before you buy
Worth considering for new businesses – if your business isn’t working out, you’re not locked into any long-term contract
Fixed interest rates and fixed rental payments
Your rental payments can be claimed as tax deductions
Your rental payments are “off balance sheet”

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