These contracts enable companies and business professionals to finance equipment purchases without capital outlay or a significant impact on working capital.

The main difference between the two contracts is that with an asset purchase contract the title vests with the financier. At the end of the contract, the title automatically passes to the borrower.

With a chattel mortgage, the client acquires immediate ownership of the equipment, over which a charge is registered with ASIC as security for the loan.

Goods which are predominantly for business use may be financed 100% this way, with payment structured to match the cash flow.

The tax deduction would normally be the interest portion of the payments plus the depreciation on the goods financed.

Key Features

Loan Amount:
$25,000 and upwards

Term:
Generally two to seven years

Payment Options:
Usually fixed payments are made monthly, quarterly, semi-annually, or annually, to suit the cash flow. Irregular payments are also possible (including a balloon payment at the end of the contract that will reduce payment amounts).

Collateral:
Generally, the equipment being purchased provides the sole security.

Again, these funding methods suit most private companies' finance requirements, and are also sometimes used by public companies. Collectively they are very flexible and adaptable.

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