Many business owners tell me if they could buy machinery and equipment from overseas, they would. This isn’t always motivated by price — often, there’s a specific asset or product line that just isn’t available here in Australia.
The problem with purchasing assets from overseas and putting them to work here is the upfront cost. Unfortunately, this upfront cost is something Equipment Finance is unable to help with. Equipment Finance only works when the lender can provide funding AFTER they take security over the asset — which they can’t do until the asset is here in Australia.
This means that you can’t use Equipment Finance to purchase equipment or machinery that isn’t in Australia yet.
Using Trade & Import Finance for business asset purchases
A Trade & Import line of credit is for the purchase of material supplies — domestic or international. This extends to equipment and machinery! While it is generally used to help manage cash flow, you may be able to use this form of business finance to purchase the asset you need. Trade and Important Finance comes with repayment terms of up to 180 days, so a longer-term business loan will need to be explored if complete repayment is unlikely to be made in just 180 days. But it’s certainly a viable option to get the asset into the country without paying for it upfront.
Here’s how you can use Trade & Import Finance to purchase equipment:
- Use the Trade & Import line of credit to purchase the equipment and machinery from the overseas supplier. The finance facility can cover the cost upfront, regardless of what country the asset is in.
- When the asset arrives in Australia, a lender will be happy to use the equipment as security against a loan. You can then use Equipment Finance to pay out the trade and import finance line of credit.
- This way, you get your desired asset here with the Trade & Import Finance, which has a repayment term of 90-180 days. After paying this out with Equipment Finance, you’ve then got a 3, 4 or 5-year term to pay off the asset while it gives you an income and perhaps a capability that’s unique to you in the marketplace.
- The trick is to know which lenders wholeheartedly support you growing your business in this way.
Using an Unsecured Business Loan to buy equipment from overseas
As discussed above, a lender cannot use an overseas asset as security for a business loan until it is in Australia. With unsecured business loans, the lender is prepared to offer finance without a security asset to fall back on. While an unsecured loan is generally more expensive than secured finance, it could be used to get the asset into the country and then refinance the loan with Equipment Finance, like in the example above.
Using the equity in your existing equipment and machinery to purchase assets from overseas
Another option to purchase assets from overseas is to take advantage of the equity you have in your existing equipment and machinery. A sale and leaseback is a kind of equipment finance business owners can use to raise capital against their existing assets. Paid back over a period of time in the same way as other equipment finance, it’s an effective strategy for raising finance to purchase assets from overseas suppliers without having to dip into your working capital.
Used strategically, Trade and Import Finance stretches your dollar further AND provides a way to acquire assets that give you a competitive advantage.
Give me a call on 0439 062 771 to put this or another strategy into action for your business.
P.S. Here are the recent types of finance solutions we have put together in just one day for our clients :
- $700k second mortgage for a business owner to expand an exciting new opportunity.
- $5M in residential lending for a business owner’s home and investment.
- $100k in car finance to a credit-impaired director.
- $4M of funding for a property development.
- $650k refinance for a small business owner’s private loan.
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