- What type of Finance is right for you?
The main choices when it comes to the type of finance you want these days are Chattel Mortgage, Finance Lease and Rental (Operating Lease). All are secured over the equipment you are getting, however each has a different set of Tax implications and Ownership points. A popular choice now is the Chattel Mortgage due to benefits associated with ownership and tax rulings. Remember it’s not just “One-Size Fits All” but should reflect what’s right for you
- Are you getting the best Rate?
Financing catering equipment is riskier from a Financier’s perspective compared to say a car, which means that some interest rates can be higher. However depending on your situation, e.g. if you already have an established venue, you can still achieve a very competitive rate compared to some other “well-known” options available in the hospitality market – just know that there are choices to better suit your situation and profile.
- What happens at the End of the finance?
With some finance options it’s not quite clear what you are up for when the finance is finished, or so what you thought should have been the finish! What may seem appealing at the outset can end up leading you into large final payments (or Residuals). Other finance might lead into ongoing terms & payments that you didn’t initially consider which you then can’t afford to get out of, so be careful to make sure that you understand how your finance will come to an end.
- How much can you afford as a Monthly payment
Some options that appear to be “Shorter term” can have extremely high monthly repayments that place severe stress on your cash flow and the viability of your business. They may also end up running for a term that’s much longer than what you thought. Finance that drains your cash flow can be the factor that sends your business to the wall so be careful to make sure that the monthly payment isn’t unmanageable compared to what you will earn with the equipment.
- Is your house on the line?
Typically bank facilities will be secured over any property that you may own – whereas Asset Finance facilities (such as a Chattel Mortgage or Lease) are only directly secured over the equipment being financed. This would generally mean that in the event that your business ceased trading or failed, a financier providing an Asset Finance facility would not be able to force the sale of your personal property to recover debts, however a bank may be able to when secured over land & buildings.
- Put it on the Mortgage or as Asset Finance (e.g. Lease)?
What might seem more appealing to put your equipment purchases on the mortgage with apparent lower interest rates, may in fact end up take many more years to pay off and in effect end up costing you more in interest. A mortgage facility will also generally not provide you with a Tax deductible finance payment. Another point to consider is what happens if you were to sell your business. An Asset Finance facility can generally be Transferred or “Assigned” to the new owner, whereas you can’t transfer your mortgage to a buyer! They would have to payout the loan in cash or find their own finance which could make it very difficult or less marketable.
- Who can you talk to about getting finance for your Restaurant/Café?
When talking to merely your bank or a single financier about a facility, they can only provide you with their one product, which severely limits your choices and options to get the best deal. Talking with a finance broker will allow you access to a full panel of funding options so that they can assist you in making a clearly more informed decision about what type of finance is best for you.