A cool infographic on the top 7 finance traps in plant hire and tips on how to avoid them from our mates at Finlease.
1. The interest rate trap.
A saving of 1% can mean $100p/m – or $6000 you save over the term of a loan. If you make 10% on your plant hire services, that means you have to earn $60,000 to pay that $6,000. If you spend five minutes shopping around for your rate, you could probably spend another 6 weeks on holiday.
2. Don't put your digs up.
Don’t let those bank scallywags force you to put your digs up for your digger. The only security they need is the digger. Your brand new, low-set display home with pool and seven car garage is off-limits.
3. Keep your eggs fresh in many baskets.
If one bank does all your debt – they’ve got leverage over you. Your old man will tell you that being loyal to your bank pays off, but it doesn’t anymore. Spreading your debt across multiple lenders makes them competitive – so you get the best rate and terms.
4. No need to flash your P&L around…
Most lenders don’t, or shouldn’t need to see financials to approve you and they should be doing it FAST. If you’ve been in business for 3 years, have a clean credit history and the business owner has assets, it should be automatic approvals for $150K for new gear, or $500K for replacement.
5. Get a facility, not a loan…
Imagine a big fuel tank that you always have there – sometimes you take fuel and use it for your business (ie. finance for assets) – then sometimes you top it up (like, when you get paid). If you have a debt facility, spread across lenders, then you always have the capacity to buy machines at short notice.
6. Used equipment and private sales are no-brainers.
Private sales and used equipment purchases can save you heaps of money but can be a hassle when it comes to financing. If you’ve got the right lender then it won’t be. Don’t pay rack rate for your gear if you don’t need to.
7. Save tax – get a lease…
I’m talking tax now, don’t fall asleep – because you can save yourself HEAPS if you stay awake and structure your finance to reduce your tax implications. Leases can offer big deductions if set up the right way. It might be the right move for your business.