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Farm machinery sales are still strong, despite the impact of drought, and farmers are tending to use more sophisticated equipment finance products, according to the National Australia Bank. The National's General Manager Agribusiness Mike Carroll said that while customers are still investing in new farm machinery, they are changing the way they buy and lease equipment. "While leasing is still popular, many farmers are taking out equipment loans where commercially suitable. This can produce some tax advantages, particularly since the introduction of GST," Mr Carroll said. Using an Equipment Loan, the customer is invoiced and has title to the equipment, while the bank provides a Goods Mortgage over it. In this case, customers are usually able to claim their full Input Tax Credit (ITC) upfront, regardless of whether or not their accounting for GST is on a cash basis. This is distinct from a Hire Purchase arrangement in which the bank owns the equipment and the customer can only claim their ITC upfront if their GST accounting is not on a cash basis. "Equipment Loans are also very viable options for increasing cashflow," Mr Carroll said. "Customers who have already bought their machinery with surplus cash from previous seasons can use an Equipment Loan now to raise funds against that equipment they already own. "There are some great advantages in taking out an equipment loan with the National rather than with a lender that specialises only in equipment finance. Where we provide a full range of financial products and services, we can take a holistic view of our customers' arrangements. Customers don't have to provide the bank with full details of their financials again for an equipment loan. "And if a customer has a bad year – as many are having now – we are able to take a longer term view of their business. This is very different to the view that other lenders may take who have the equipment alone as security. "The National is able to provide a pre-approved facility for customers' requirements once a year which means they are able to buy equipment when they need it without contacting the bank for approval. The National can also provide a 'Leaselock' which allows the interest rate, and payments, to be fixed up to twelve months in advance at no extra cost. "In addition to a team of 520 agribusiness specialists, the National has specialist Asset Finance personnel to assist customers with advice on how to best structure their lending."
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