Are high equipment costs holding back your business growth? Commercial hire purchase (CHP) could be the answer you’re looking for. With CHP, you can get the equipment you need now without a big upfront hit, helping you keep cash flowing and scale up faster. But what is a commercial hire purchase exactly ?
In a nutshell, it’s a financing setup where a lender buys the asset for you. You make regular payments to ‘hire’ it, and once everything’s paid off, it’s yours to keep.
Find out how CHP can boost your business and make growth easier. Let’s dive in!
What Is A Commercial Hire Purchase? An Overview
Commercial hire purchase (CHP) is a smart way for businesses to handle equipment and vehicle costs. Here’s how it works: a lender buys the asset for you, and you pay it off in easy, regular instalments.
Once you’ve made all the payments – including any final lump sum, if needed – the asset’s yours to keep. This setup helps you maintain cash flow, so you can stick to your budget and plan ahead without disrupting your operations. With CHP, you can get the equipment you need now and focus on growing your business.
Take the Next Step with Co-Pilot Finance & Insurance In Australia
Ready to level up your business? At Co-Pilot Finance & Insurance, we help Aussie businesses like yours secure the assets you need through commercial hire purchase. Our flexible finance solutions give you the stability, tax perks and cash flow control to stay competitive. Whether you need to expand your fleet, invest in new machinery or boost efficiency, our team’s here to guide you.
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How Does A Commercial Hire Purchase Work?
With CHP, a lender buys the vehicle or equipment you need and you pay it off over time. Your regular payments cover the asset cost plus interest, and when the last payment is made, which can include a final balloon payment to keep monthly costs down, the asset is yours to keep.
Who Is Commercial Hire Purchase Right For?
CHP is ideal for businesses that need high-cost equipment or vehicles for the long haul but want to skip the big upfront expense. This includes:
- Transport companies needing a fleet of vehicles
- Construction businesses requiring heavy machinery
- Manufacturers investing in costly equipment
- Agricultural businesses looking for tractors and farm machinery
- Start-ups focused on conserving cash while building up
Tax and GST on Commercial Hire Purchase
With a CHP agreement, it’s good to know the tax and GST implications. The GST on the asset’s purchase price is usually included in the hire purchase cost. If your business is registered for GST, you can claim GST credits on the GST portion of each instalment, which can help boost your cash flow.
Why Choose Commercial Hire Purchase? Key Benefits
CHP comes with a range of perks that make it a solid option if you’re looking to boost cash flow while expanding. Here’s what it brings to the table:
Preserve Your Cash
One of the top benefits of CHP is keeping cash in your pocket. Since you’re not paying a huge amount upfront, you’ve got more liquidity to put towards other business essentials like marketing, R&D or growth efforts. CHP also provides a buffer during tougher financial times, keeping your working capital intact.
Fixed Interest Rates
CHP usually comes with a fixed interest rate, so your payment stays the same each month. This stability makes it easier to budget and plan, with no surprise jumps if interest rates change.
Tax Advantages
CHP can be quite tax-friendly. Interest payments and asset depreciation are typically tax-deductible, which helps reduce your taxable income and give your bottom line a boost. So, not only are you gaining the equipment you need, but you’re also getting some tax benefits along the way.
Flexible Payment Terms
CHP terms can be set up to suit your cash flow. Want to keep monthly payments low? A final balloon payment can help by reducing the regular instalments. CHP’s flexibility makes it easier to fit these payments into your budget without impacting your other operations.
Use Equipment Right Away
With CHP, you get immediate access to the asset without waiting to pay the full price upfront. This is a big plus if you rely on up-to-date machinery or tech. Having what you need on hand lets you hit the ground running and helps sync up your costs with the revenue it generates.
Own the Asset at the End
Once you’ve made the final payment, the asset is yours. This means you can add it as a business asset, use it for future financing, or sell it if needed. This end-of-term ownership gives you the flexibility to manage your asset strategy and adapt as your business evolves.
Flexible Payment Options in Commercial Hire Purchase
CHP financing gives you plenty of payment options, making it easy to match payments to your business’s budget and cash flow.
Monthly Payments
Monthly payments help spread the asset cost evenly, keeping things manageable. They make it easy to maintain cash flow and stay on top of the budget month after month.
Quarterly, Half-Yearly, or Annual Payments
For businesses with seasonal cash flow, CHP’s quarterly, half-yearly or annual payment options let you time payments with peak revenue periods. It’s a smart way to avoid financial strain during quieter months.
Upfront Deposits
An upfront deposit reduces the financed amount, lowering your monthly payments and cutting down interest costs. It’s a good way to keep cash flow steady while minimising what you owe.
Balloon Payments
A balloon payment is a larger final payment that lowers the cost of your regular instalments. This option gives you more cash flow flexibility month-to-month while paying off most of the balance at the end.
Early Termination
Some CHP agreements let you settle early, which could save you on interest and free up funds for other business needs.
Wrapping Up
CHP is a great option if you want to expand without draining finances. Its flexible payment plans and tax perks turn big costs into manageable expenses, helping you keep cash flow intact while getting the assets needed to grow. If you’re looking for a way to stay competitive and keep cash flow steady, CHP is worth a look.
