What you should ask on boat finance - by Finlease
by Jardine Media on 4 Feb 2008
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It’s a strange irony of life: many people spend months, even years, searching for their perfect boat and then sign the first loan document that the broker puts under their nose. Often boat finance contracts are entered with the borrower having little or no appreciation of the long term commitments that they entail. Charter and pleasure boat finance specialist, Mark O’Donoghue of Finlease, says that getting the right loan at the time of purchase is essential and he explained that it’s not that hard to do.
O’Donoghue said that boaties need to ask themselves the following questions before signing on the dotted line.
1. Do I understand the structure of this loan and my repayment commitments?
2. Are there any early termination costs?
3. What is the interest rate and is the loan secured by just the boat?
4. How long do I intend to keep this vessel and what am I going to use it for?
5. And what are the likely tax & GST ramifications, if any, of this lending arrangement and purchase?
If these enquiries sound like a headache, and if you just can’t stop staring at the polished teak and sweeping lines of your intended purchase, you may like to give Finlease a call. It’s their job to understand all this and much, much more.
Once you contact Finlease and tell them your requirements, they will search out the best boat loan for your particular circumstances from over 20 finance providers. Then it’s up to you whether you choose to go ahead with it or not. And the best news is that if you decide not to go ahead, there is no charge.
O’Donoghue explained that Finlease is ‘happy to do the work because we know that in the vast majority of cases it (the loan) is taken up.’
O’Donoghue started Finlease back in 1989. Like many other people at the time, he had become increasingly dismayed by the arrogance some mainstream lenders had displayed towards their customers. He told himself that there was a much better way to do business. He saw a gap in the market and he took it, starting Finlease with just himself and an assistant, and specialising in providing equipment and machinery finance to manufacturing companies.
He set out to build a business which offered finance at low interest rates and tax effective loan structures with minimal conditions. Determined not to follow the lead of the banks, he was committed to providing his clients with a high level of service, which is something that remains vital to his company today.
The combination of good customer service and effective finance products paid off. In its first year of trading Finlease turned over $7 million of equipment finance. The company contined to grow and this year is expected to turnover in excess of $300 million in equipment and property finance, with a client base of 4000 companies and offices in Sydney, Melbourne and Brisbane. As O’Donoghue puts it:
‘We finance everything from carpet tiles to helicopters.’
Finlease moved into the boat finance business in the early 1990s and it’s now about 15% of their annual turnover. O’Donoghue explained that the move into this area happened as Australia was emerging from severely recessed economic conditions. A number of battle scarred manufacturing clients, after organising finance for things like their car fleet or manufacturing equipment, would look up at the end of the meeting with a sparkle in their eye and say ‘I’ve found this great boat…’
It wasn’t just one manufacturing client looking for boat finance, it turned out to be a flood of them. Pretty soon Finlease moved from just organising pleasure boat finance to financing company boats and charter boats. O’Donoghue said that it didn’t take much intelligence to realise that if some of his best commercial clients were coming to him with boat finance issues, then the reverse was also likely to be true.
‘We thought that there would be some very, very good commercial clients out there for us who we may make initial contact with through the boat finance area.’
Years passed and Finlease built networks in the marine industry, securing a reputation as experts in the boat finance field (‘if you do something well you should actually develop expertise in it’) and gaining an increasing share of the market.
But in August 2002 something happened that sent shockwaves through the entire marine industry. The Tax Office released a statement that indicated they would be looking very carefully at the tax declarations of people who were involved in the charter boat industry, either as owners or operators. O’Donoghue said the very clear message that the ATO were sending was:
‘We think that there are a lot of people doing things that they shouldn’t do from a tax point of view.’
Realising that this view represented a real threat to the marine industry, O’Donoghue co-ordinated a campaign to lobby against the proposed changes. Named CBISC (like a shortened version of Sea biscuit) or Charter Boat Industry Survival Campaign, the group included some of the biggest names in the business. Seawind was a key player, as were Lightwave, Jeanneau, Bavaria, Sydney Yachts, Beneteau and the vast majority of charter industry companies.
O’Donoghue stepped into the role of campaign co-ordinator and found himself effectively forced to disengage from his own business for the duration.
‘Naively I thought it would take about three months but it actually took 18 months. In that process I delved incredibly deeply into all aspects including significant high level meetings with the ATO, with our representatives at the time which were Ernst & Young. We spent over $300000, raised from industry, to go in there and look at changes in the legislation or at least the ATO’s view about this industry.’
CBISC’s lobbying was effective and in May 2003 the ATO issued a revised ruling which clarified the taxation guidelines for charter boat owners and operators. Further lobbying activity, primarily by the Whitsunday Charter Boat Operators, culminated in an additional change of legislation which was introduced in July 2007. This further underpinned the 2003 ruling and now provides even further certainty to people involved in charters.
‘I suppose in that particular 18 month period where there was a real threat to industry, it substantially increased my skill set or my understanding of the charter boat side. So we do have an expertise in charter boat finance. Part of it came from the fact that we are experts in finance but part of it came from me living and breathing this thing for 18 months.’
In the coming months O’Donoghue will outline popular boat finance products for anyone considering taking a loan for a pleasure, company or charter boat. In the meantime, Finlease has some excellent boat finance resources on their website, including calculators, spreadsheets, application forms and fact sheets.
See http://www.finlease.com.au or call 1800 358 658.
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