Chattel Mortgage’s allow you to lower your monthly repayments with a residual or “Balloon” payment and take ownership of the equipment or vehicle. While the equipment is owned by the business, the lender uses the equipment or vehicle as security against the loan.
The key difference between a Chattel Mortgage and Finance Lease is “ownership”. With the Chattel Mortgage, the lender advances the funds to the borrower to buy and own the asset and registers a mortgage against the purchase. Once the Mortgage is paid, the asset title is transferred to the business. With a Finance Lease, the lender still owns the asset but the borrower has the option to purchase the asset at the end of the lease. The main difference between these two options are ownership and how GST is charged on the transaction.
*The above should be used as a guide, please contact your accountant or Financial adviser to see what is applicable to your business.
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