A finance lease is a financing device that enables companies and business professionals to acquire capital goods they need for business use, without a capital outlay.

Enterprise Finance Australia arranges for the most appropriate financier to purchase the equipment the client requires. It then leases the equipment to the client for an agreed time frame in return for a series of rental payments which can be structured to match the company’s cash flow.

For tax purposes, the lease is usually considered a "conditional sales contract". A lease agreement sets out the desired term of the lease, the negotiated rental repayments and the residual value of the leased equipment. Providing the equipment is used to produce assessable income, the lease rentals are tax-deductible.

In some cases, equipment already purchased (in the last 6 months) can be financed this way.

This funding method suits the finance requirements of most private companies and is also used by many public companies.

Key Features

Loan Amount:
$25,000 and upwards.

Term:
Generally two to seven years, depending on the length of time the asset is required. (A Finance Lease is generally non-cancelable during its term but the term is flexible and early termination is possible).

Payment Options:
Usually fixed payments made monthly, quarterly, semi-annually, or annually, to suit the client’s cash flow. Irregular repayments are also possible. A residual at the end of the contract is a mandatory feature of a finance lease.
Payments are made by direct debit.

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

At the end of the contract :
When the lease expires, the client may want to purchase the equipment, refinance its residual value, or return it to the lessor. (If it is returned and sold for less than the agreed residual value, the client will need to make up the shortfall).

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