• About Us
  • Partners
  • Blog
  • Contact
  • Book a consult
    Get in touch with our team
    info@cabbagecapital.com.au
    Search
    -

    Operating Lease

    What is an Operating Lease?

    An Operating Lease is a simple and cost-effective way for businesses to secure the necessary vehicles or equipment, roll maintenance and repairs into the package, and claim tax benefits. Why spend more to buy when you can pay less to rent? An operating lease is a simple and cost-effective way for businesses to secure the necessary vehicles or equipment, roll maintenance and repairs into the package, and claim tax benefits. 

    An operating lease is a contract that allows for an asset’s use but does not convey ownership rights of the asset. The lender will generally be responsible for the maintenance and service of the asset during the lease period. This allows your business to use the equipment without incurring the high expenses of purchasing it.

    Similar to a commercial hire purchase, it’s also a good option for low-value equipment and technology with a short life span and quick obsolescence or equipment that needs to be upgraded frequently.

    It’s a good solution for a business that wants to avoid taking on the risk of obsolescent or depreciating assets such as technology with a short life span. And you want to be able to update or upgrade the asset regularly. You’ll also enjoy tax-deductible lease payments and keep them off your balance sheet.

    The Benefits of an Operating Lease

    An operating lease allows a business to use the asset while ownership remains with the financier. At the end of the lease, you return it without balloon payments or complications of disposing of obsolete assets. So, it’s ideal for businesses that need to upgrade regularly or want access to the newest models. The two key benefits of an operating lease are that you carry no residual value risk and can combine most of your asset’s running costs into a single monthly payment.

    • No balloon payments or residual value risk
    • All running costs, maintenance, and repairs are paid for in a single monthly payment 
    • Minimal risk of obsolescence as there are no ownership obligations
    • Lease payments will generally be tax-deductible
    • No liability on the balance sheet as it is considered to be off-balance sheet financing
    • Renting is generally more affordable than purchasing
    • No cost to dispose of the asset once the contract ends
    • End-of-lease flexibility to renew at a discounted rate
    • Option to purchase used equipment for fair market value (FMV)

    Like a trade and finance loan, operating lease helps businesses bridge their cash flow gap.

    What Businesses Use Operating Leases?

    • Hospitality
    • Restaurants & cafes
    • Catering 
    • Construction
    • Mining
    • Medical 
    • Tradies
    • Manufacturing 
    • IT Companies
    • Professional Services

    How does an Operating Lease work?

    An Operating Lease is a low-cost way for businesses to rent necessary vehicles or equipment. You rent the asset for a set time, making regular lease payments. You have exclusive rights to use the asset during the lease term, but you do not own it. You return it to the lender at the end of the term, so you’re not tied down to a depreciating asset, although you can choose to lease it again if you wish.

    Because your payments are not equal to the total value of the asset, you don’t have to pay a residual (balloon) payment at the end of the term. This makes an Operating Lease generally cheaper than a Finance Lease.

    Loan terms are usually short, allowing you to upgrade the asset regularly and go for a newer model. They also come with less risk. The lender maintains liability for the asset. They take on the risk of the purchase and the resale. Your main obligation is to meet your repayment obligations.

    Step-by-step Process of an Operating Lease

    1. Lease application

    You identify the asset your business requires and apply for an Operating Lease supplying all relevant business income, profit and loss documents, equipment make and model, supplier information, price quotation, and their terms of payment.

    2. Background check and purchase of the asset

    The lender conducts background creditworthiness, processes lease application, and coordinates with the supplier to purchase the asset.

    3. Enter into an Operating Lease agreement.

    You and the finance company enter into a legal contract in which you will use the asset during the agreed lease period.

    4. A single monthly payment

    Your business makes a single monthly payment for the use of the asset over the term, while running costs, maintenance, and repairs are covered under the agreement.

    5. Option to return, renew, or buy

    At the end of the lease term, you can return the asset to the lender, renew an extended lease term at a discounted rate, or purchase it from the lender for fair market value (FMV)

    How to apply for an Operating Lease

    Establish your business requirements

    Contact our principal broker Brin Hayden to discuss your circumstances and begin the process. We’ll source the ideal Operating Lease provider for your needs and ensure all your critical information is in order to secure the asset you need. In addition to other types of business loans, we also offer chattel mortgage loans.

    Organise and lodge application

    You provide the requested completed documents and we will organise and lodge the application on your behalf. In addition to business documents, you will need to satisfy the following:

    • Have a valid Australian Business Number (ABN)
    • Supply account number and BSB of your main business account
    • Have been in business for at least 12 months
    • Asset to be used for business purposes at least 51% of the time
    • Meet the lender’s minimum credit requirements

    Gain approval and enter lease

    With our guidance, we can source a provider and assemble your application in as little as five business days. The speed of approval will depend on the asset you wish to finance and its value. Because the lender is purchasing the asset on your behalf, the process will generally take longer than other types of business loans.

     

    Why Choose Cabbage Capital as Your Finance Broker?

    Our founder and principal broker, Brin Hayden, brings over 20 years of experience in the commercial sector, focusing on financial solutions for small to medium enterprises to provide a real impact.

    “Finding the best operating lease for your business and assets can be complicated, with countless lease options and tax considerations to navigate. Unlike banks or individual lenders, we’re not limited to a few options. We source finance from our network of 30+ competitive lenders vying for your business. 

    I search to find the most competitive rates and terms, then prepare your application for success. Even if you’ve been turned down elsewhere, let me know what you need and leave the rest to me. If your business requires vehicles or equipment, talk to me, and we’ll get it done.”

    Brin Hayden

    Founder and principal broker

    “Even if you’ve been turned down elsewhere, let me know what you need and leave the rest to me. If your business requires vehicles or equipment, talk to me, and we’ll get it done.”

    Let’s get started

    Brin Hayden business loan broker and founder of Cabbage Capital

     

    If you’d like to book a meeting to discuss your needs or start a finance application, leave your details, and we’ll get back to you within 24 hours.
    Alternatively, call Brin at 0418 574 655

    Name(Required)
    This field is for validation purposes and should be left unchanged.