Glossary of Finance Terms
A Chattel Mortgage is a commercial loan that provides funds to your business to purchase an asset (new or used). Your business retains ownership of the asset, and the financier accepts the asset as security for the credit.
Finance Lease
A finance lease is a tax-effective method of financing the full value of an eligible new or used asset. A finance lease also enables your business to have the use of business equipment while the financier retains actual ownership of the equipment throughout the lease.
Operating Lease
An operating lease is like a rental, whereby you are paying to use the asset but don’t own the asset. Some operating leases incorporate the maintenance & running costs into the lease payments and these are known as Fully Maintained Operating leases.
Novated Leasing
A salary packaging arrangement is where an employee leases a vehicle and the lease payments are deducted from the employee’s pre-tax income. The lease is “novated” or transferred to the employer, who takes on the responsibility for the lease payments.
Balloon Payment
A large, final payment at the end of a loan or lease term. It is often used to lower the regular monthly payments throughout the term, with the remaining balance due as the balloon payment.
Personal Property Security Register (PPSR)
A national online register that records security interests in personal property, such as equipment and vehicles. It provides a mechanism for creditors to protect their interests in case of default or insolvency.
Fixed Interest Rate
An interest rate that remains unchanged throughout the loan or lease term. It provides certainty to borrowers as their repayment amounts remain consistent.
Residual Value
The estimated value of an asset at the end of a lease or loan term. It is often used in finance leases and determines the final payment required to take ownership of the asset.
Input Tax Credit
A credit that businesses can claim for the Goods and Services Tax (GST) paid on purchases used for business purposes. It allows businesses to reduce their GST liability by the amount of GST already paid on inputs.