Episode 54: Asset Finance 101

May 9, 2022

It’s a common issue that when you’re growing your business you often need finance to assist. In today’s episode we break down the most common types of Asset Finance, and how they apply to what you are trying to achieve. We discuss the different types of loans including Chattel or Commercial Mortgages, Hire Purchases, Leases and Novated Leases as well as Standard/Full Documented or Express Loan Applications. Sometimes overlooked in the excitement to obtain your new goods, the length of term vs asset retention or lifespan of the asset aren’t considered and so we also break this down too plus chat about comparing Repayments and Directors Guarantees and their impact on your personal position.

If you have any questions regarding this type of finance, please feel free to reach out to Sarah at SFE Loans 

Podcast Transcript Available Here

Duration: 36:34

Trudi Cowan: Welcome, everyone to this week's episode of the Financial FOFU Podcast. I'm Trudi. Sarah Eifermann: I'm Sarah. Trudi Cowan: This week, we are going to have a bit of a chat around asset finance. One of Sarah's special topics.   Sarah Eifermann: Asset finance, what's an asset, Trudi?   Trudi Cowan: Something of value to the business. The easiest types of assets that we can easily identify are the physical ones our cars, equipment, and machinery.    Sarah Eifermann: When we're talking finance, we're talking about things that you need to finance at a physical, usually for your business, and what that looks like.   Trudi Cowan: So we're talking about borrowing some money so that we can go buy a new car is probably the common one that we have. Sarah Eifermann: It's probably the most common one. Workhorse of some kind [inaudible 00:51], whether it be huge [inaudible 00:52], they're the most common ones I think our clients would definitely have, but I have seen some funny ones over the years that we've financed.   Trudi Cowan: Give us an example.   Sarah Eifermann: Gym equipment comes up all the time as an asset. I financed a horizontal Directional driller, which is one of those big machines that have pipes that are drill bits that go down under the ground and drills like across freeways or like across football. And then you attach the pipes on the other end and they sleeve back through the hole that they've drilled under the ground.   Trudi Cowan: Did you have to try and explain that machine to the bank?  Sarah Eifermann: Unfortunately, No. They did no other work, which is good. I've seen lots of different things. some people ring me and ask for the fit-out of their factories or their workspaces and that's a different type of finance that's actually Business Finance for fit-out usually not Asset Finance.   Trudi Cowan: I'm presuming there's not just one type of loan you can get to buy an asset, Talk us through. What are some of the different types of loans that we could look at if we're wanting to buy an asset for our business?   Sarah Eifermann: I think it's important to start with the different types of Assets finance, so often known as a Chattel mortgage or Commercial loan, its old name is Chattel mortgage, and its new name is Commercial loan. That is one specific type of finance option. Those are the most common. They're the most ones that accountants recommend.   Trudi Cowan: I presumed the name mortgage as it's tied to that asset there's some sort of security over that.   Sarah Eifermann: Usually with the PPSR register, which is why we did an episode previously on that so it would all tie in for you. They take a PPSR charge and it's important to note that a lot of your creditors will do a PPSR search and may lodge a charge against PPSR. It does come up on applications in the business space. So whether it's asset finance or business finance, it does come up. So always be aware of what's tied to your entity on PPSR as well, because if they incorrectly do lenders use PPSR to see whether you're being truthful on your application. And sometimes I've had an issue where the client the lender had incorrectly launched PPSR and then launched the correct one and so the business now has four PPSR for two cars. And they haven't removed the other two, but they had some court documentation provided, but try explaining that to a funder. Right so just keep an eye on it.  Sarah Eifermann: Chattel mortgage or a Commercial loan, it's a term with a set repayment that is usually over three, four, or five years. It may or may not have a balloon payment and the balloon payment is a residual amount that you choose to pay at the end of the term so it lowers your repayments. Chattel mortgages do exist and some of them do require that the Chattel is the asset because Chattel is another name for an asset. If you are registered for GST and claiming the GST that you actually put that GST back into the loan facility so you make an additional repayment on the fourth month. So it is important to note that if your accountant is requesting a Chattel mortgage and stipulating, it must be a chattel mortgage. Double-check that the terms of the facility that you obtained don't require the additional repayment unless you're comfortable doing that, but often the new name is called Commercial loan. For example, pepper asset finance they call it a chattel commercial chattel mortgage and we'll just call it a Westpac commercial loan. Same thing,  so that's the first type. Hire purchase is where Sarah Eifermann: Would you like to explain what a hire purchase is, Trudi?  Trudi Cowan: No, I think you know it better. Sarah Eifermann: Hire purchase is a different type of loan that sometimes can be requested from an accountant depending on your position in business and what you're trying to achieve which is why again, it's really good to do business planning and work out what you're trying to do from a tax point of view as well and your tax planning.  Sarah Eifermann: That's where you don't actually own the vehicle on your balance sheet or the asset on your balance sheet. You are hiring to purchase from the funder so you can't use for example an instant asset write-off because you don't own it. Right, so you make set repayments with the term and you may have the rights to buy at the end of the term for a set price. It's usually the value that's similar to a residual had you done a commercial loan they used to be very popular, so hire purchase or commercial hire purchase/CHP we're seeing less and less of them these days because there's no real benefit.   Trudi Cowan: There's not really any. You sort of want to get that upfront, right off of it or the depreciation is usually a better claim than just being able to claim the lease payments.   Sarah Eifermann: A hire purchase is similar to a rental. There are a couple of funders that do it now  Trudi Cowan: It's a rental with an option to buy at the end.  Sarah Eifermann: Which to be honest, most of them are marketing now a rental with an option to pay. So I do know of a Brisbane-based rental company that is offering rentals and sometimes in the yellow good space, so excavation equipment, earthmoving. There are benefits to that. But often again depending on your tax planning and your business planning, owning the assets on your balance sheet so that you can claim the depreciation that can be really important to your business. I suppose that takes us into lease. What's a lease. A lease in some ways is similar.    Trudi Cowan: Hiring it with, you never own the asset, really   Sarah Eifermann: There's no ownership. The ownership stays again on the lender's or the funders' balance sheet and you just make a set repayment and you return it at the end of the term and renewal rollover. I suppose it's important to point out most people are familiar with a Novated Lease and a lease is not the same thing. A Novated lease has pre and post-tax benefits, but also contributions and it's really important, especially if you're PAYG to get the numbers crunched on a Novated lease before you take the lease out. Often a Novated lease company or your employer will sell you a Novated lease that has been the best thing since sliced bread, you'll save money. Sarah Eifermann: We've had clients, unfortunately, though, that they've had to refinance them because they do impact your borrowing capacity if you're trying to get financed for a loan. Home Loans usually, but also the maintenance fee that's included can change for the term. So you might think that the fee is going to be x y z and then the Novated lease company turns around and says well with the price of fuel going up. We are now going to increase your maintenance cost and it's additional funds that you now have to pay that you're not in control of, when you do the numbers then it's not as economical or tax beneficial as you thought it was. Trudi Cowan: It really does come down to the terms of the lease and also the value of the car that you're buying also pays it plays into the tax effectiveness of it as well. There are lots of different factors involved in whether it's going to work for a particular individual.   Sarah Eiferman: There are different types of facilities that are available and then there are true ways of applying for them or verifying your income. You can do a full dock application which is a standard application where you provide tax returns, portals, balance sheets, and all your financials. They need to be up to date they need to be demonstrating a profit and not be at a loss even if it's just a tax loss. You need to have all your tax debt paid. So there are times and places where standard applications are required, usually over $150,000 if you're buying a piece of asset that's $800,000. You need to have a full application and in that instance, three years of financials demonstrating income.  Trudi Cowan: We're talking big machinery and equipment for those which absolutely require the full dock.   Sarah Eifermann: There are other instances where, again, depending on the type of asset if it's a specific type of asset, you may not qualify for what's called an express or a low dock application so an Express application is express. It's a self-declaration that you can afford the new repayments and that your business is been trading for two years, you're a property owner or you have a 20% deposit towards the purchase price and you are GST registered. Those are the four requirements.   Trudi Cowan: A lot of businesses would make those requirements fail easily. Sarah Eifermann: Yes and No. A lot of people think that you can, especially if you've been trading for less than 12 months you can just car finance. Look, there are some options out there that are able to provide it but again we'll get to it soon. Talking about repayments versus rate and the difference between what you should look at. Trudi Cowan: A lot of businesses would have the two years, they would have the ABN, they'd be able to provide director guarantees it would just then be with being property owners or had the correct deposits. It's probably the main one for most.   Sarah Eifermann: There are expressed facilities available if you've been in business less than two years. It's just at the rate changes or the deposit amount changes. So some lenders will only need a 10% deposit. Others will require 20. Others won't do it unless it's a full standard application and others just won't do it at all.   Trudi Cowan:  Within these different types of loans. Now, we sort of already mentioned you can get different terms, in terms of the length of the loans. Do they all try and take some PPSR over the asset or their loan types that don't really worry about that? No,   Sarah Eifermann: No, they all take PPSR and most of them will take directors' guarantees. So directors guarantees and perhaps you can add to this once I've explained it, but directors guarantees mean that as the director of that entity, you're on the hook if you fail to pay that debt.   Trudi Cowan: Yes, they'll come after your personal assets.    Sarah Eifermann: Correct, so there is no separation or protection when you give a director's guarantee. And it's really important to understand that because you could have $500,000 worth of equipment finance or asset finance and not realize that you're on the hook personally. So if you run that company into bankruptcy and trade insolvently, there's no protection and they're coming after your personal asset.   Trudi Cowan: It doesn't matter that you're a company because you've given a personal guarantee that allows the bank to chase you personally, to meet that obligation.  Sarah Eifermann: So you have negated your asset protection then.    Trudi Cowan: Which you know for a car fine. As you say you're talking a couple of $100,000 It's a different proposition and you need to consider that very carefully in line with your business. We often find this is also why the business might only be in the husband's name, whereas the house might be the wife's name. Not always a 100% effective strategy, but it's often why people do that so that the only director providing that guarantee is the husband who doesn't own the house.   Sarah Eifermann: Correct, but here's the problem if you want to do an Express application, you need to own property in a lot of instances to qualify    Trudi Cowan:  As 22, isn't it?  Sarah Eifermann: You can do it and we've talked about this in previous episodes by having wife or husband depending on who owns or runs the business. They being the director of the asset holding entity which is the Trust. The Trust still being registered for GST lodging and return. Wife owning property, wife borrows/purchases asset and leases it to trading entity.  Sarah Eifermann: Again, this is why planning is so important to protect assets because then trading entity is completely separate from asset holding entity and there's still impacts that you have to consider if you've got no money. You have to pay the debts. But there are potentially things to consider when we look at this and also as you say, like the risk associated depending on the value, depending on your turnover, depending on lots of different little things are really important to consider.   Trudi Cowan: Now I can probably answer this question myself but the interest rate is going to vary depending on your credit and how much you're borrowing what you're borrowing for, all those things.   Sarah Eifermann: It does within reason. I think the biggest thing to think about when it comes to commercial finance of this kind, asset finances, it's not about the rate. It's about the cost of the facility over the term. In business finance, we are so tuned to considering the annual percentage rate because that's what our mortgages are quoted in and that's what we're familiar with. But what can happen with different facilities and this is a common issue with dealership lending, because they have different licensing requirements than asset finance brokers or mortgage brokers that also do asset finance is that you'll find that they'll quote you a rate, but then the repayment is much higher because there's a lot of fees that are actually loaded into the facility. Origination fees, whether it's an ongoing monthly charge, so it's always good to not necessarily compare on rate but compare repayment for the same term.   Trudi Cowan: Which then factors in all those additional fees that might be occurring within the loan.   Sarah Eifermann: And often you can find that if we're talking total cost or repayment cost that alone with a lower repayment that's got say $1,000 origination fee built into it and 10 or a $12 monthly fee will end up being a $30 more expensive a month in repayments, even though it's got a cheaper rate and that's why always compare rate repayments with term and balloon not rate for rate because I'll never compete with another lender based on rate, depending on your circumstances. Okay, sometimes you can, but you compete based on well this product doesn't have ongoing fees, or it doesn't charge the application fee is half and so that impacts your total cost.   Sarah Eifermann: I was going to say it's probably a nice place to segway into the term that you choose for the life of the asset, is that where you're going?   Trudi Cowan: Somewhere else I was going but it is a good point because there's no point having a 10-year loan on something you're only going to keep for three years.   Sarah Eifermann: On top of the fact that you pay interest in like you pay the interest across the term and they usually fixed the interest. The interest is fixed for the term and you pay it upfront. If you look at a traditional mortgage curve, it's a lot of interest at the start and no interest at the end. So if you break that term and sell that asset at three years, you've paid the interest across 10 regardless.   Trudi Cowan: I was talking to a client the other day that said you know, we've got good cash flow, we don't want to have a long-term loan, but we do want some financing. I said, well don't go the five-year option then consider whether a one, two or three-year option makes more sense for what you're happy to be repaying so that you can then get that loan paid off and not have to be worried about it beyond that.    Sarah Eifermann: And sometimes it depends on your needs, of course, like anything but sometimes a three-year loan term with a 50% balloon which is the ATOs guideline amount for maximum balloon across two or three years. It's 50% so you can't make residual higher than that. Sometimes as a choice, it might have a slightly higher repayment, but it gives you much more flexibility in three years, rather than just taking five years with no balloon or five years with 20 set balloons straight from the get-go.  Sarah Eifermann: For example, at three years, you can roll the balloon over for another two years of what's redo and make your repayments as if it was five years, but at least you know that the asset is exactly what you need for your business and it meets the requirements that you have for your growth or the downsizing of your business as well and it reduces your payment choices rather than purchasing a new piece of equipment. For example, I did this with my last vehicle because the vehicle I had before I fucking hated and I had taken it on a four-year term and I paid it out at two and a half. I had to just cut the interest, right so when I got the next car, I didn't know if I was gonna like it. So I did a three year with a 50% balloon and made slightly higher repayments so about $100 more a month to give me the flexibility at three years and then at three years, I could decide what I was going to do and I just rolled the remaining amount of the balloon in over two years and I'll own the vehicle outright by the end of two years.  Sarah Eifermann: So there are benefits to being aware and that is probably the main thing that I discussed when clients approached me about terms and looking at terms is how long are you going to have this asset for and are you going to claim the interest asset upfront on it as well because the other thing is depreciation is amazing but you still have to pay for the asset.   Trudi Cowan: Yes and the other thing is as well if you were to write off that asset that loan still has to be paid out by write off I mean you write off the car and the car no longer exists.   Sarah Eifermann: Do you mean an accident or you've written it off in depreciation.   Trudi Cowan: I mean by an accident Yeah. If you're an accident-prone person or you know that you've got staff that tends to damage these types of assets. You need to factor that into your length as well.   Sarah Eifermann: How do you pay out the debt on a vehicle if the insurance amount isn't enough to cover the debt? You still have to keep paying that debt and technically you actually need to notify the lender and they'll call that loan in.   Trudi Cowan: Because it's tied to the asset that no longer exists.   Sarah Eifermann: Which is on the PPSR, which is deregistered as an asset, which means it's no longer on PPSR so if they do an audit and find that out, it's again something to be really careful of and make sure you're fulfilling your obligations,   Trudi Cowan: Which, you know, we've touched on a few of these things, but I want to specifically touch on some of the reasons you might go one loan type over another. And I think what we're talking about now sort of touches on it as well in that if you're not really sure about whether you need or want this asset in your business, then maybe a short-term lease is more appropriate. So that you can [crosstalk 20:07] that's why you know, so hire purchases and leases do still have value because it allows you to try before you buy anything on the long term.   Sarah Eifermann: Especially based on the value of the asset, right? So say you're buying a 20-ton excavator. 250/300k minimum these days, right? That's a lot of money. If you've just been an excavation operator, to go out and commit if you don't have contracts lined up. So you might say, all right, I'll take it on a 12-month rental, see if I can make this business work and then if I can, I buy the asset. So there are still places for it.   Trudi Cowan:  Again it comes down to, what is the plan for the business and what is the plan for this particular asset for use within your business? I mean, even things like I'm buying this vehicle, but I know that my staff member is going on maternity leave in nine months. While I might not need that vehicle then so maybe you're not a 12-month lease of a vehicle is all that you need to manage that.   Sarah Eifermann: A lease you might be able to get.     Trudi Cowan: You know what I'm saying. You've got to bring those business needs as well and not just that I want this for my business.    Sarah Eifermann: That's another thing. Here's another one. Computers something small. 2, 2 1/2 K. Usually out of date the day you walk out of the store with them. Trudi Cowan: I've made mine last pretty well. Sarah Eifermann: So have I thought but let's be realistic. Technology, a computer is out of date within three months. Especially if you're due to have the latest tools, latest equipment [crosstalk 21:40] specific graphic design or creative design like they need the fastest most up to date, usually MacBooks or Desktop Macs don't even know what they're called. Not a Mac person to stay on top of that. Like is it valuable for them to be able to, at the end of 12 months turn the laptop or the computer over and get a new loan?   Trudi Cowan: Especially if that lease includes maintenance and repairs on that machine. So if anything was to happen to it during that period, it's already paid for.   Sarah Eifermann: Yes it's not their cost. There are benefits to these things. And again, looking at your assets and what you're going to do with them is important and planning out.   Trudi Cowan: It's still relevant but starting to become old school. An example of that is the photocopy machine because the photocopy machine in your big office would have been leased and the Xerox man or whoever it was, would come and service it, whatever the period was, and check that it was all still working.   Sarah Eifermann: 8 cents per page, including ink and paper.   Trudi Cowan: For most businesses, it wasn't worthwhile they actually buy the machines. No, they would just lease them with a servicing contract included in the lease.   Sarah Eiferman: But those machines could cost anywhere from 5 to 15k     Trudi Cowan: Most large offices would have multiple of them which meant that they could replace them every so often and keep having the latest machine.   Sarah Eifermann: I wonder if they went to Xerox heaven with COVID. v   Trudi Cowan: I would be willing to bet the big organization still have them. If you walk into any accounting or law firm, they would still have photocopiers.   Sarah Eifermann: They had to pay their lease contract repayments during COVID regardless and can't let them go because of the cost whilst they stood there and did nothing for two years.   Trudi Cowan: But it just goes to show that, one loan type is not necessarily appropriate for all assets. So just consider what's going to work well for you and your business. Some of the things that you need to have a bit of think through in terms of what do you buy? What do you need it for? How long do you need it for?   Sarah Eifermann: I suppose it's important then to consider the type of broker that you use for this type of finance in the sense that you know, there are people that finance and specialize in this type of finance and there are people that are still good at this finance, but they don't specialize in this finance, but these are the questions that you should be asking somebody and if they can't answer these questions, they're not the right person for you. Being aware that we all have a panel of lenders, and some of us have more flexible lenders on panel than others. And so if you're seeing your mortgage broker about business asset finance, and they don't do any type of other business finance, whether it's commercial property, working capital, Denver finance, they may not be the right person for you to discuss this with just because there are so many nuances as we've just talked about in these types of loans and why and where they apply and how to choose them for your needs.      Trudi Cowan: So if I'm going to a mortgage broker that got me my house then I should probably ask them some questions about whether they're the appropriate person.   Sarah Eifermann: They might just tell you that they are though so I think the content of what we've been discussing today.   Trudi Cowan: They can go with some loaded questions. They can ask them questions about, is the shadow mortgage going to be right for me or why is it going to be right for me and just test them out on their knowledge.     Sarah Eifermann: Exactly, right. If you don't get an answer that sort of gels or vibes, speak to somebody else.   Trudi Cowan: All right, I've got a few questions I'm going to throw at you to wrap up the session. How long are the application processes?   Sarah Eifermann: Depends, on how long, is a piece of string, within reason.  Trudi Cowan: Let's go I want to buy a car low doc.  Sarah Eifermann: Within reason if I finish my sentence. Usually, you can have an approval within 24 hours from now and settlement within another 24 hours from that, provided that you have filled out the documentation in accordance with the instructions and I say that tongue in cheek because it happens a lot and that you've arranged your insurance because often it's a settlement condition that you have insurance noting the funder, certificate of currency and if you don't have it, then we can't settle. Also, are you stupid because if you drive the car out of the dealership and you smash it, it's written off you now have debt.    Trudi Cowan: I know I said it. If I want a longer sale, I want to buy a $100,000 excavator so    Sarah Eifermann: 100,000s are okay. Let's jump to 300,000 brackets is usually three to 150.  Trudi Cowan: How long would that take?  Sarah Eifermann: Usually three to five business days from the assessment. Trudi Cowan: It's still not a long period. It's still fairly quick.  Sarah Eifermann: Yes, it's a double-edged sword though, right? Because some people know this and so they go and buy their assets on a whim. They don't do the planning because they can get the finance pretty easily or quickly.   Trudi Cowan: So I know when you buy a house, you settle, you hand over the money, and then give you the keys to the house all in one day. Is it the same with this type of financing?     Sarah Eifermann: It depends on how you buy it. So the one thing we haven't talked about yet is the difference between private sales and dealership sales. Some finances will only lend to you on Express or standard if you're buying through a dealer. Other lenders will allow you to buy from a private sale and that requires an inspection of some sort with an extra cost or again depends on the lender. Sometimes the fintechs are sending a text message to the vendor and asking them to send three photos back to prove that the vehicle exists as their third party check.  Sarah Eifermann: Yes, I nearly fell off my chair and I was told this the other week, and that then qualifies as their inspection report. So some of those lenders for example, that do both will enter into private sales, but they'll just lower your rate by an extra percent or 2%. So the other thing to consider is the age of the vehicle or asset that's really important. Often cars can't be more than 10 years old at the end of term. So if it's a five-year car, the maximum term is five years.     Trudi Cowan: It's just considering the value of the asset to the business [crosstalk 28:17] which most people will be looking to replace.      Sarah Eifermann: When there are bigger pieces of machinery like prime movers and things like that it's quite normal for a truck that you buy to be 15 years old already. So you can still buy a 15-year-old truck but it can't be more than 20 years old at the end of term. So the maximum term you'll get is 5 years, so similarly if it's an 18-year-old truck, you only get a two-year term.    Trudi Cowan: Now I'm going to guess the answer to my next question anyway because I think we've run into a lot of it anyhow, but what documents do I see people need to apply. My answer is, that it depends. Driver's license is going to be your identity documents, your proof of ABN, your proof of property ownership with the council rights notice, proof of deposits, and those sort of things. A full doc application is going to be pretty much, my story. Sarah Eifermann: What current [inaudible 29:12] Trudi Cowan: Given the current environment with the ATO chasing everyone for money, Can I borrow? It a slightly off-topic but I'm gonna ask it anyway.   Sarah Eifermann: To repay ATO debt or can you borrow for asset finance if you've got ATO debt? Trudi Cowan: Actually, both questions are good. Can I borrow if I have ATO debt? Sarah Eifermann: The short answer is it depends. It's complicated is the answer to that. The answer is yes. It's very expensive and you've got to meet particular criteria to qualify, if you can utilize the payment plan and do not get a direct penalty notice stick with that if you can. Sarah Eifermann: Can you borrow if you've got ATO debt it's going to depend on the lender and sometimes the answer to that is No. So once again, ATO debt is bad. It's a statutory requirement. Do your cash flow planning and keep that shit up to date.     Trudi Cowan: Can I borrow to repay ATO debt if I've got some assets to use?   Sarah Eifermann: So what you're talking about is called a sale and buyback is a formal term where you've got an unencumbered asset and you want to leverage it to draw equity out of it. Potentially, yes because you've got an asset that you can use again, it's expensive. But there are circumstances where we do use one. I've got one at the moment where it's a truck, it's an old trunk, and they're already pre-approved so I've got no concerns about their ability to get financed because they got that done first, but they couldn't find a truck to buy and so he ran into a friend of his on the highway as truckers do and he said they did his apprenticeship with him and he's like, Oh, hey, I got a truck. Do you want it? I didn't register it because registration is really expensive for trucks in Queensland.  Sarah Eifermann: So it's not registered currently. So I can't finance a vehicle that's not registered because we can't take security against it because it's not registered. It's not on PPSR so because of that, he has to get it registered prior to me being able to finance it. So he asked if I paid cash for it, can we then finance the vehicle once I've got it registered? And I was like that's called sale and buyback. Let's go back to the funder will they allow that. In this instance, the funder will allow it and they'll even fund the cost of the registration with proof of payment of the invoice from Queensland. What's over the guards? Not ATO? I can't think of what Queensland Road Authority. Sarah Eifermann: So sale and buyback that's what's called.   Trudi Cowan: The last question I'm going to ask, potentially an episode in itself but you hear the government throwing around about government back loan options. What does that mean?   Sarah Eifermann: Government back loan options are where the government guarantees either 50 or 80% of the total funding available. It becomes the guarantor to the lender, so it provides security to the lender and gives the bank comfort that they will assist if something goes wrong in terms of, so they're pretty much lending the money effectively. The problem with these loans is that the government then because you know they were designed by politicians, not people who understand credit matrixes and risk matrices in finance. So every lender has its own policy matrix for how it funds and its risk position on that. And they told them not to amend their risk positions to then allow for this funding to be issued. And the issue is that some of these lenders have such a tight risk matrix is that the only way you can get funding from them is if your business is trading amazingly and really asset-heavy and profitable, at which point you usually don't need funding.   Trudi Cowan: So you don't need the government to back the loan.   Sarah Eifermann: A lot of business owners have been ringing me asking, I think I qualify, can I get this type of facility and the short answer is often no because if you qualify for it, your business is not trading profitably. COVID aside flood or bushfire impact aside, the historical evidence of your business shows that you weren't trading solvently in the first place. So you really shouldn't be borrowing money at all. And so they're advertising them hard. But once again, they're not really clear and transparent in how difficult they are to obtain. They do have 10-year terms on them and that's often what's attractive and the interest rate is quite low surrounding the 3 1/2  to 5% depending on the lender. You can use them for a range of things, including asset finance or purchasing equipment. You can use them for working capital within your business and sometimes fit out you can't use them to repay other debts like ATO debts and stuff like that.   Trudi Cowan: So, my final takeaways from everything we've talked about today, find a broker that can assist you that so actually specializes in it so that you can get the best deals. Do your business planning so that you know what type of finance is really appropriate and the length of the finance that is appropriate for the particular asset and what you need.   Sarah Eifermann: Do your tax planning as well because it's relevant, and takes a longer lead time so that you can have conversations with the broker to get the best outcome for your business.   Sarah Eifermann: Here's the other thing, which is a hot tip. I can pay your dealer today in what's called a real-time transfer and it hits their bank account. They will tell you that they can't see the money until tomorrow but they've been paid today. So when you purchase a vehicle make sure you understand this settlement process because they'll try and blame the broker saying the deal hasn't been paid when it has because sometimes if they can't see the reference on there. Their account balance will go up but they can't see the reference on their bank statement. Then they won't allow the vehicle to be released even if I send them the recipient created. What is it called? The remittance advice from the lender saying that the money has been paid, they still won't release the vehicle. Lots of people get very disappointed when they can't pick up their vehicle when they thought they could because the dealer says no. That's my hot tip. Clear enough.   Trudi Cowan: Hopefully you've all taken away a couple of tips from today that are very helpful for you when you're looking at your financing. An asset can be a really helpful tool to assist you in growing your business so it's certainly something that's worthwhile. Having a look at   Sarah Eifermann: Sure is. I've got one favor to ask everybody please if you could leave us a review within the app that you were listening on. Often if it's an apple, you can just tick the stars on Financial Fofu if you go to our main page and give us a review. It really helps other people to find us and lifts our ratings within the search engine.   Trudi Cowan: Perfect. Thanks, everyone.  Sarah Eifermann: See you later. Bye. Trudi Cowan: Bye.