A range of documentation on the financial position, turnover and trading history of a business is required to complete a standard commercial credit application form. Criteria can also include having trading figures for at least 12 or even 24 months and having a minimum turnover. But if you are new in business, operate on a small scale, self-employed, and can’t meet the criteria, you may need to secure equipment finance without financials.
Loans may be approved for a range of operators with no or less documentation for many business assets. These can include plant, machinery and equipment used in many industries, used and new, from all manufacturers including leaders such as CAT, Komatsu, JD, and others. Applications for loans with no financials are not approved by all banks and credit providers. Connecting with non-bank lenders that do offer these types of approvals can be made through specialist brokers, such as Jade Equipment Finance.
We outline what is required, prospects and expectations and how operators may successfully secure workable machinery loans on a no financials basis.
What is equipment finance without financials?
Equipment finance without financials are loans for business assets to commercial entities without all the finance documents usually required for approval. These loans are described in the lending sector as low doc, no doc, lite and ABN loans. Essentially, the credit application is approved with none or minimal details and documentations on the financial and trading position of the business. Applications may also be approved for businesses with low turnover and short operational times.
The types of businesses that may need this special consideration and approval can include new and start-up operations, owner-operators, contractors, sole traders, micro businesses and individuals operating with an ABN only. In fact, any commercial entity that does not meet the standard criteria for approval as set by a lender or the market, may seek machinery loan approval on a no doc basis.
Asset Finance Facilities Without Financials
While no doc loan applicants require special consideration from specialist lenders, they have the same selection of commercial credit facilities as other businesses. All types of business assets may be financed with Rent-to-Own, Commercial Hire Purchase, Chattel Mortgage and Leasing.
There are significant differences with these facilities which include how a tax deduction is realised, how GST is treated, posting the asset to the business accounts and balance sheet, suitability to different account methods, and with the rate of interest. Rates vary with Chattel Mortgage and CHP offering the lowest rate across the market, Leasing slightly higher and Rent-to-Own offering the highest.
To determine which facility will best meet their objectives, business owners should consider the compatibility with their method of accounting and how the features of each will work for their business. Discussing the options and opportunities with an accountant is advisable.
All asset finance facilities can be sourced and structured by our brokers to best meet those individual objectives. Rates are fixed, fixed terms are negotiated to meet ROI targets, monthly repayment schedules are fixed, and balloons, residuals and buyback are available. On approval, no doc applicants are entitled to all the tax deductions and other benefits for their selected loan product.
Security for Equipment Finance Without Financials
The security or collateral requirements for no doc loans can depend on the lender assessment of the individual application and the condition of the machinery. Asset finance facilities are essentially secured loans, with the asset as the security. The general guideline is for new machines to be easily accepted as collateral while the condition and value of used machines is assessed against the loan required. Lenders assess applications to determine whether an applicant will be required to also provide additional collateral.
Another aspect for serious consideration can be how much deposit is needed. Established businesses with strong financials can easily be approved for no deposit asset finance. Smaller businesses with shorter trading periods may be assessed as a higher risk for borrowing the full purchase price. Where this occurs, the business may need to reduce the total requested by making a deposit.
Interest Rates on Equipment Finance Without Financials
No doc and low doc loan applications are by their nature considered as a higher lending risk than businesses with full documentation and strong financials. Some may not have traded long enough to establish an extensive credit history or have extensive asset holdings to support their application.
On this basis, no doc loan applicants may be offered higher interest rate loans compared with other businesses. But rates can vary considerably across the commercial lending market. Key to still achieving a highly competitive rate, can be accessing the right lenders. We provide that access through our accreditations with specialist non-bank machinery lenders.
Eligibility and Requirements for No Financials Machinery Loans
To be eligible to apply for commercial loans, all businesses will need a current ABN and ID documents. Being registered for GST is not mandatory for credit approval but is required under Government rulings for all commercial entities with turnover exceeding $75,000 pa. It may also be seen as a positive by lenders and contribute to a better outcome.
While no doc loans assume that the applicant will not have any financial records to support their application, even start-up businesses are encouraged to prepare what information they can on their current or proposed activities. Where tax and BAS returns, annual and current accounts and turnover figures are not available, information on business plans and any confirmed contracts should be provided.
With no or very little documentation on the business provided, no doc loan applicants may be required to submit details of their personal financial position, and their personal credit score will be checked.
Benefits of Using Expert Brokers for Specialist Loans
With so many variations with lender criteria, rate possibilities and other aspects of no doc loans, businesses may benefit significantly by using our broker services. We handle finding the right lender, negotiating the most affordable rates and workable terms, and processing the application. Connect with us to discuss how we can assist you to secure a workable machinery loan, with no docs.
To maximise your equipment finance without financials options, contact Jade Equipment Finance on 1300 000 003.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
