Understand your finance before you sign

With a chattel mortgage you own the asset from day one and the lender takes security over it. GST-registered businesses can usually claim the GST on the purchase price upfront, and depreciation and interest may be claimable.

With a finance lease the lender owns the asset and you rent it for an agreed term, with a residual payment at the end. Lease payments are generally treated as a business expense.

Neither is always better. The right choice depends on your cash flow, how you account for GST and what you want to happen at the end of the term. We set out both side by side and your accountant confirms the tax treatment.

• Chattel mortgage: you own it, GST often claimed upfront
• Finance lease: lender owns it, payments usually an expense
• Both can include a balloon or residual

A balloon (or residual) is a lump sum left owing at the end of the term. Setting one lowers the regular repayments, because you are not paying off the full amount during the loan.

It suits assets that hold their value, such as trucks and yellow goods, where the asset can be sold or refinanced to cover the balloon. It suits less well when the asset loses value quickly or you would struggle to pay the lump sum.

• Common range: 0% to 40% of the price
• Plan how you will pay it: sale, trade-in or refinance
• Try different balloons in the calculator above

For most commercial asset finance you will need identification, your ABN details and a quote, invoice or listing for the asset. What else the lender asks for depends on the size of the deal and the pathway.

Full doc applications use your last two years of tax returns and financials. Low doc applications use recent BAS statements, business bank statements or an accountant's declaration instead.

• Driver's licence and ABN
• Asset quote, invoice or listing
• BAS or bank statements (low doc)
• Tax returns and financials (full doc)
• Contract or letter of engagement if you have one

A conversation with us does not touch your credit file. A credit enquiry is only recorded when an application is submitted to a lender.

That is why we work out the right lender first and only lodge once you have agreed. Multiple applications to multiple lenders in a short time can make you look riskier, which is exactly what a broker helps you avoid.

Banks often decline a business with less than two years of trading. Specialist asset lenders look further: your experience behind the wheel, the contract or letter of engagement, and the income the truck will earn.

Expect a deposit or a slightly different structure while the business builds a trading history. After twelve months of clean repayments, better terms usually open up for the next truck.

• Show your driving and industry experience
• Bring the contract or engagement letter
• A deposit strengthens a new ABN file

Low doc finance is for established ABN holders who cannot, or would rather not, provide full financials. Lenders assess your ability to repay using BAS statements, bank statements or an accountant's declaration.

Rates can be slightly higher than full doc, and there are usually limits on the amount. For many business owners the speed and simplicity are worth it, especially when an opportunity will not wait for the tax return.