Waste management is on the frontline of the green revolution.
With new environmental remediation technology and other manufacturing processes coming back on shore with the government’s proposed $1.5 billion Modern Manufacturing Initiative, gaining finance to keep your waste management business on the cutting edge is as important as ever.
In this guide, we’ll show you how to take part in the future of Australian manufacturing and waste management with prudent equipment finance.
BUYING LONG TERM ASSETS FOR LONG-TERM PROJECTS
If your plant is set to be permanent with little or no deviation in its operation long-term, a secured finance to purchase your plant is a popular option.
The two main variants of secured finance for equipment finance are a chattel mortgage or hire purchase.
Chattel mortgages and hire purchases give businesses the option to finance more than 100 per cent of the value of their plant.
This amortises (pays off over time) insurance, training, or other establishment costs such as installation.
Chattel mortgages usually have lower interest rates than similar, unsecured loans. Business can also claim interest paid, GST paid, and depreciation back on tax.
Chattel mortgages and hire purchases are functionally identical – you pay off a loan until the balance is zero over a set period.
In a chattel mortgage, you take ownership of the machinery instantly and it’s registered as an asset.
In a hire purchase, you are “hiring” the equipment from your bank or lender and your payments are entered in your books as an operating expense.
Talk to your accountant or financial controller to see which method suits your business best.
LEASING YOUR EQUIPMENT
If you need to keep your equipment up to date, leasing your equipment is a great option.
This is often considered a cash flow neutral solution to gaining access to equipment. Your monthly repayments are generally cheaper than loans.
At the end of your lease, your business can hand the equipment back or take on a new lease with new equipment.
You’ll also be able to claim the lease payments as tax deductions in many instances, depending on how your business uses the equipment.
A finance lease is even more flexible as it gives you a third option to buy the equipment outright at the end of the lease term.
You’ll need to make a final residual value payment. You also gain back interest, either through claimed deductions or passed on by your financier as savings.
INVESTING IN CARBON CREDITS
You can buy or lease equipment to help offset your carbon emissions under the Clean Energy Regulator as part of an “eligible offsets project.”
Carbon Credits are a type of personal property, like a security – carbon credits can be borrowed against and transferred to other businesses. Talk to your accountant for more information.