Why should businesses purchase capital with finance rather than paying cash?
Businesses traditionally go through peaks and troughs which results in cash reserves increasing and reducing. Therefore a business may wish to retain these cash reserves for future business expansion such as a deposit on new business premises or increased superannuation contributions.
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A business has $100,000.00 in their company bank account and plan to pay cash for an office fit out, new computer and telephone system.
An alternative would be to invest $100,000 in a term deposit at 6.25%p.a. The initial $100,000.00 investment would have increased to $135,408.12 before tax in 5 years.
If that business were to finance their office fit out on a Commercial Hire Purchase facility, it will have only cost them $122,233.37 before depreciation and allowable tax deductions. Assuming the company chose to finance their office upgrade they would still have their $100,000.00 plus accrued interest they would also now own the financed asset. A potential saving of over $13,000. |
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Why would anybody want to pay cash for something that is cheaper to finance and then ask themselves how long it took to save their cash asset?
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We will help you choose the best finance deal. We’ll tell you how your finance package will work and which one best suits your needs. We’ll work hard to make it easy for you.
Once you have chosen a finance deal we will help you complete your application form. You may be surprised at how much easier things become when you get help from an expert.
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