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Finance and lending Q & A for The Fox Group

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Finance and lending Q & A for The Fox Group

We recently sat down with Central Coast-based Chartered Accountants The Fox Group to discuss some common questions within our industry.

What are the main reasons finance is knocked back?

Occasionally we see clients who have defaulted on a telco and other accounts on a regular basis. If you have had a dispute with another business, it is vital to have it resolved. Because they usually then list an unresolved account on your credit file for all lenders to see.

What are the things lenders are looking at when considering finance approvals? Where do they look & what information is visible in your credit file? What to do if you have something to your credit file?

They are looking for the customer that has been in business at least two years and registered for GST. For a large purchase, they would most likely want up to date financials as well as a commitment, asset and liability statement.

For cars, up to 100K, we mostly don’t require any financials just proof of good past credit. Your credit file, unfortunately, tells any lender your true credit history. All loan inquiry, any defaults, court orders and judgements. It will also disclose any companies you are a director of. Tax dept debt is the latest to be listed on your credit file. Credit repair agencies may be of some assistance if you are trying to clean up your file however they are very expensive.

Do multiple applications hurt? Are you better off getting the application right from the start?

Yes, they do indeed, the more credit file applications, the more your credit score is eroded. Shop around first before pressing the button.

What should a borrower have to make the lending process a smooth one?

Up to date financials, forecasts, management accounts, Clean portal history with ATO, etc.

These days an honest declaration of all assets and liabilities as the financier can see your debt as the banks now share the information under new lending guidelines. ATO debt is a big negative for all banks now. On large deals, they want it cleared before approval, and in most cases, this is very difficult.

How to secure the cheapest overall costs of finance? I.e., How to get the best rates. Any suggestions

Use a finance broker who is tapped into all the banks and is offered their best rates on a weekly basis. Stay clear of car yard finance.

What are the main types of finance offered in the industry for Plant & Equipment? Does it matter these days?

Mostly Chattel Mortgages for the self-employed. Novated leasing for salary packaging and Rental for Schools and Hospitals.

Balloon or No Balloon? Does it matter?

I tend to like no balloon as you will get equity in your purchase much faster. Still, most people do take a balloon to keep the payments at a manageable level. You have to be very careful having a long-term finance contract and a high balloon on a vehicle that does not hold its value. If the car is worth less than the outstanding balloon at trade-in time, you’ll have pay the shortfall.

What are some of the myths with finance? i.e. : You need to have had a credit card to have a credit history?

No, you don’t many people only have a debit card. If you do not have any credit history, then you don’t have a credit file, so funding is harder to get. Paying cash all the time may work against you.

How can some dealerships offer 1% finance on new vehicles & equipment?

The product they sell is called a subvention contract. You pay full retail for the car then the car yard has to give the finance company up to 8k to cover interest. The trouble with this is that you have to have a balloon on the end that is a percentage of the full sale price on t the discounted price, so you are always paying more overall. Negotiate the best deal and fund the car with a separate financier.

Any tips for negotiating the best price on new equipment? Eg End of the quarter, etc.

End of the calendar year, end of month end of June are always the best times. I always see the best deals if the sale is negotiated in the last four days trading as long as it can be delivered by the end of that month.

What are the key advantages you believe in using an equipment broker vs a Bank? Eg, Speed, multiple pricing options, etc.

All good brokers will shop around and negotiate the best deal as far as rate, penalties, and fees. On large loans some banks may be slightly cheaper than others, however, will have a considerably long and arduous application process. We always inform the client if another lender may be cheaper and ask them for say $450 per month do they want to spend days collating pages of questions. Cheapest is not always best.

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Do’s and Don’ts of driving in Ice and snow?

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With a lot of our clients planning on heading to the snow this season we thought we’d put together a Do’s and Dont’s of winter driving to ensure that drivers are prepared and stay as safe as possible.

Thankfully in Australia, we don’t experience the real winter extremes of Russia, Canada or Alaska, however driving in icy wet conditions anywhere can still be dangerous.

Don’t:
– Warm up your vehicle in an enclosed area
– Warm your car up for too long before driving (your engine will warm up faster and more efficiently driving)
– Apply hand brake when parking (break can freeze)
– Use cruise control
– Leave windscreen wipers down
– Risk driving without chains in 2 wheel drive vehicles (Check out here)

Do:
– Accelerate/Decelerate slowly to maintain traction and avoid skidding.
– Drive slowly
– Consider adding anti-freeze to your engine radiator
– Keep fuel levels topped up
– Use your lights
– Be conscious of Black Ice
– If driving a diesel vehicle, try and use ‘Alpine Diesel’ if available.
– Increase driving distances to other vehicles to allow for longer stopping times (5-6 seconds).
– If driving in snow, try to avoid unrequired stopping especially on inclines.
– Track weather reports
– Carry a torch (and spare batteries), blanket, dry, warm clothes, tow rope, shovel, wheel chocks, spare food and water, and a first-aid kit.
– Clear ice from windows and mirrors
– Engage 4×4 in snow or ice conditions
– Have your car serviced before embarking on your journey.
– Keep bottles of water in the car

Stay safe & enjoy your trip!

Have a finance enquiry?

Why use a finance broker?

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A strange question for a finance company to ask right?

We are often surprised when we hear clients have previously only relied on their banks for their loans.

It tends to generally be a lack of understanding that people believe financing through their existing bank will be the cheapest, quickest and easiest solution. Unfortunately, this in many cases couldn’t be further from the truth and means people are missing out on various saving opportunities.

There are countless reasons why it pays to use a broker when shopping for your loan, and even if you want to use your own bank, you can still use a broker to process paperwork and manage the application on your behalf.

If you are not set on using one particular lender then it pays to seek the services of an experienced broker.

The first reason is;

Choice:

The biggest advantage of using a broker over a bank is choice. When you sit in front of a broker you are sitting in front of 10 plus banks and 50 + products versus visiting a banker who has access to only one bank’s products. This is especially important at time like now, when the banks are saying ‘no’ more, and by having more choices you’re likely to get a ‘yes’.

Experience:

At Leasecorp we have been helping clients build their businesses for over 28 years. We pride ourselves on knowing our client’s and the industry to which their businesses operate in. This enables us to ensure we select the most appropriate finance product as well as the most suitable lending partners. We are committed to our clients and have in most instances life long relationships. Banks move their staff around and reward good performers with promotions away from their customers.

Specialisation:

If you’re looking for specialised assistance with your loan, it pays to talk to a broker. Whether your business is in Earthmoving, Transport or Heavy Haulage, our staff are experienced in dealing in your industry. Bank staff often don’t have the training or experience in one area, but service whoever happens to walk into the branch.
For every application that comes through our office, one of our finance managers will personally visit the client at their home or workplace to take care of all paperwork and processing.

Our service includes a ‘product finding service’ that involves our staff searching our national fleet database to ensure you purchase the best value car, truck or excavator available, unlike a bank we’re not just about delivering the money.

Follow Up & Personal banker:

Most of the applications we process are approved with 24-48 hours, if they take longer we update our clients frequently as to the hold-up and the expected approval.

A lot of the time Leasecorp works with both our clients and their trusted accountants to ensure we structure the most suitable loan solution with business growth in mind.

We look forward to welcoming you to our business family.

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