What is a Chattel Mortgage and is it Right for Your Logan Trade Business?

What is a Chattel Mortgage and is it Right for Your Logan Trade Business?

For a trade business owner in Logan and its surrounding areas, having reliable vehicles and equipment is not a luxury—it's a necessity. Whether you're a builder in Beenleigh, a plumber in Tamborine, or an electrician working across the Gold Coast, your work ute, van, or machinery is the backbone of your business. But purchasing these assets can require a significant amount of capital, which is why a chattel mortgage is often a preferred finance solution for Australian small businesses.

A chattel mortgage is a type of secured loan specifically designed for businesses to finance the purchase of movable assets, known as "chattels." These assets can range from a new vehicle to earthmoving machinery or even office equipment. The core feature of a chattel mortgage is that your business gains ownership of the asset from the moment of purchase, while the lender holds a mortgage over the chattel as security for the loan.

This arrangement is different from a hire purchase or a lease, where the lender retains ownership until the final payment is made. With a chattel mortgage, the asset immediately appears on your business's balance sheet, and you have a clear path to outright ownership from day one.

The Key Features and Benefits of a Chattel Mortgage

A chattel mortgage is a popular choice among tradies in Logan and across Australia due to its flexibility and potential tax advantages.

• You Own the Asset from Day One: Unlike a lease, you take full ownership of the asset at the time of purchase. This gives you control and the ability to list it on your business's balance sheet immediately.

• Flexible Repayment Options: Chattel mortgages typically offer a fixed interest rate for the entire loan term, providing certainty for your budgeting. You can also structure your repayments to suit your business's cash flow, including the option of a "balloon" or "residual" payment at the end of the loan to keep your regular monthly payments lower.

• Potential Tax Benefits: This is one of the most attractive aspects for many small businesses. A chattel mortgage can allow you to:
  • Claim GST Upfront: If your business is registered for GST and uses cash accounting, you can generally claim the full GST component of the purchase price on your next Business Activity Statement (BAS).
  • Deduct Interest and Depreciation: You may be able to claim a tax deduction for the interest charged on the loan and the depreciation of the asset, based on its percentage of business use.

It is crucial to speak with a qualified accountant or financial advisor to understand how a chattel mortgage may impact your specific tax position.

Is a Chattel Mortgage the Right Choice for Your Logan Trade Business?

A chattel mortgage is a strong option for many Logan-based tradies who are looking to expand or upgrade their equipment. To help you decide, consider these points:

• Do you need to own the asset? If having full ownership and the ability to use the asset as security for future finance is a priority, a chattel mortgage is an ideal solution.

• Are you focused on managing cash flow? By financing 100% of the asset's cost (for approved applicants) and using a balloon payment, you can free up working capital for day-to-day operations and other business expenses, like wages and materials.
• Are you looking to maximise tax efficiency? The ability to claim GST upfront and the ongoing deductions for interest and depreciation can make a significant difference to your business's bottom line.

How Ferns Finance Brokers Can Help Your Logan Business

At Ferns Finance Brokers, we're not just a faceless finance company; we're a part of the local Logan and Beenleigh community. We understand the specific financial challenges and opportunities facing self-employed tradies in the area.

Our team of experts can help you:

• Find the Right Fit: We take the time to understand your business and your financial goals. We'll compare a range of chattel mortgage options from our panel of lenders to find a solution with a competitive rate and terms that work for you.
• Simplify the Process: The world of business finance can be complex. We simplify the application process, handling the paperwork and communication with lenders so you can focus on running your business.
• Provide Local, Trusted Advice: We're on the ground in Logan and the surrounding regions. Our advice is tailored to the local market and the needs of our community. We pride ourselves on being approachable, knowledgeable, and genuinely invested in your success.

Ready to get the new work vehicle or equipment your Logan trade business needs? Contact Ferns Finance Brokers today for a no-obligation chat. We'll help you secure the right finance so you can get back to building, fixing, and serving our local community.

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