Chattel Mortgage

Getting business finance can take many forms. However, one of the most popular choice today is the use of the chattel mortgage. This is thanks to the flexibility, low-interest rate, and tax advantages that it affords all business. As such, if you are interested in financing the purchase of your next equipment or machinery or truck, you might want to give chattel mortgage a chance.

What Is A Chattel Mortgage?

This is a commercial financing product that companies, sole traders, and partnerships can take advantage of. It is useful for a wide range of business financings such as that of a truck, equipment, vehicle, or car.

With this option, you get access to a secured loan that provides ownership of the purchase from the very beginning. This is because the chattel mortgage involves getting access to the loan sum. Then, you can purchase the item of your choice with the sum.

Afterwards, you execute a mortgage in favour of the lender as security for the loan. However, this mortgage does not erode your ownership. Rather, it is merely a lien that you eradicate once you complete repayment. This option is largely beneficial as you enjoy a lower interest rate.

Also, you will have between one and five years to complete the repayment. However, in some cases, you can get as much as seven years as the repayment term. Other important features of this commercial product include:

  • You can use the balloon payment option that allows you to reduce your monthly repayment
  • It is a secured finance that provides a fixed and lower interest rate. In turn, this supports the budgeting objectives of your business
  • You can utilise a cash deposit or trade-in with this commercial product. Alternatively, you can opt for 100 per cent of the purchase price
  • You enjoy flexible repayment that allows your business to retain financial stability

Tax Benefits of a Chattel Mortgage Arrangement

One significant advantage of opting for the chattel mortgage arrangement is that you enjoy tax benefits. These tax benefits include:

  • You can record the interest repayments as a business expense.
  • You have ownership from the beginning making it easier for you to claim depreciation.
  • You avoid GST charges on your monthly repayments.
  • You can claim back the GST charged on your cost price when filing your Business Activity Statement. Of course, you must account on a cash basis.

Frequently Asked Questions

You must be a registered business within Australia to be eligible for a chattel mortgage. You must also intend to apply the vehicle to the business at least 50 per cent of the time.

This is a specialised financial product that allows you to get a chattel mortgage with minimum documentation. Typically, this is a great option for recent businesses who do not have all their account in order. So, lenders assess the projected and current cash flows, asset position, and age of business to determine eligibility.

Typically, you can borrow as much as 100 per cent of the cost of equipment or vehicle through the chattel mortgage. Alternatively, you can deposit either through a trade-in or cash payments.