Asset finance can help a business acquire the vehicles, plant, machinery or equipment it needs without paying the full purchase price upfront.
The most appropriate structure will depend on the asset, how it will be used, the borrower's financial position, cash-flow priorities and taxation treatment.
A finance broker can assist with comparing available structures and managing the application with the selected lender.
Assets that may be financed
Subject to lender requirements, asset finance may be available for:
The age, condition, source and resale value of the asset may affect the lender's decision and available terms.
- Cars and light commercial vehicles
- Trucks and trailers
- Excavators and earthmoving equipment
- Agricultural machinery
- Manufacturing equipment
- Medical and dental equipment
- Hospitality equipment
- Office and technology equipment
- Construction machinery
- Other identifiable business assets
Common asset finance structures
Depending on the transaction and lender, options may include:
Chattel mortgage: The borrower generally owns the asset, while the lender takes security over it until the finance is repaid.
Finance lease: The lender owns the asset and leases it to the business for an agreed term. End-of-term arrangements depend on the facility.
Hire purchase: The business uses the asset while making scheduled payments and generally obtains ownership after satisfying the agreement's terms.
Vehicle finance: Vehicle facilities can be structured differently depending on whether the vehicle is for personal, commercial or mixed use.
Equipment loans: Finance may be secured primarily against the equipment, although guarantees or additional security may also be required.
Product names and legal structures vary. Tax and accounting outcomes should be confirmed with an accountant or tax adviser.
Balloon and residual payments
Some asset finance agreements include a larger payment at the end of the term.
This can reduce regular repayments but leaves a larger amount to be paid, refinanced or otherwise dealt with at the end. It also creates a risk that the asset's value will be lower than the amount outstanding.
The repayment structure should reflect the asset's useful life, expected value and the business's capacity to meet the final payment.
What will the lender assess?
The lender may consider:
Some transactions may qualify for streamlined assessment. Others require financial statements, tax returns, bank statements or further supporting information.
- The asset being purchased
- The purchase price and supplier
- Asset age and condition
- How the asset will be used
- Time in business
- Business turnover and cash flow
- The applicant's credit profile
- Existing financial commitments
- Available deposit
- Director or owner experience
Finance should match the asset
A finance term that materially exceeds the asset's useful working life may create problems. The business could remain liable for debt after the equipment has become unreliable, obsolete or uneconomic.
The proposed term and repayment structure should therefore be assessed against the expected use and value of the asset.
Finance the assets your business needs
A broker can help identify potential structures, prepare the application and coordinate with the lender and equipment supplier.
Request an asset finance assessment
Speak with an experienced broker about your circumstances, available options and the next steps.
FAQs
Can I finance used equipment?
Potentially. Age, condition, supplier, value and useful life can affect eligibility and the available term.
Do I need a deposit?
Some transactions may be financed without a deposit, while others require a contribution. This depends on the lender, asset and borrower.
Can a newly established business obtain asset finance?
Potentially, although additional supporting information, security, experience or a deposit may be required.
Can the GST component be financed?
This depends on the finance structure and lender. Accounting advice should be obtained about GST treatment and any available input tax credits.