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What is Asset Finance?
Written by
Shaun McGowanAsset finance is a collection of business finance products that are used to finance various business assets. Assets can include all types of short- and long-term business equipment, machinery, and other assets, and can even include office fit-outs.
Asset finance is available from banks, specialist lenders, and by working with finance brokers. You can apply online with specialist lenders, and finance brokers can assist if you are unsure which lender or finance product is most suitable for your needs.
In summary, asset finance:
- Can be used to finance anything relating to a business
- Does not require a deposit in most cases
- Can be used to purchase assets outright
- Can be used to lease or rent assets from a lender
- Can be obtained from banks, non-bank lenders, specialists, and through finance brokers
- Can provide financing solutions to businesses with bad credit
Key Features
- Borrow from $5,000 to $500,000
- Fixed or variable interest rates
- Repayments to suit your budget
- Terms from one month to five years
- Secured & unsecured options
Who is eligible?
- Own a business and have an ABN
- Business is GST-registered
- Permanent Citizenship or Residency
- Minimum business-operating time of six months
- Can provide business bank statements
Shopping around
Shopping around for the right loan can save you thousands of dollars in interest and fees.
How does Asset Finance work?
Asset finance is a category of business loan products used to buy new assets, or replace and upgrade existing assets for a business. Asset loans are generally secured by the purchased asset, with terms relative to both the type of asset loan and the lifespan of the product.
In Australia, there are many types of asset finance products, offered by just as many individual lenders. While the rates, terms, and fees may vary between lenders, most asset finance loans work in a similar way. The maximum amount you can borrow is up to $2,000,000.
Compare Asset Finance options
There are several options available for asset finance in Australia. When enquiring about asset finance, you can quickly match the needs of your business to the most appropriate form of asset finance from various lenders. Generally, asset finance will involve:
- Calculating how much you need to borrow to finance the assets you require for your business
- Applying to a lender for asset finance
- Meeting the approval criteria for the lender
- Receiving finance to purchase the asset, or receiving the asset directly from the lender
- Making regular repayments to the lender until the finance amount and any interest or fee charges are repaid in full
Considerations you will need to take into account when comparing asset finance options are:
- If it is more suitable to purchase the asset or rent the asset for a set period
- Any benefits your business may receive from certain types of asset ownership
- Any tax deductions available through certain types of asset finance
- Any early repayment penalties
- If ownership is immediate, transferred at the end of the term, or optional at the end of the term
Asset finance interest rates vary between lenders and begin from 4.00% to 9.90% depending on the strength of the application and the risk level presented by the borrower.
Asset finance may also include fees. This commonly includes an application fee, and some types of asset finance may also include ongoing monthly fees. If you plan to repay your loan amount early, be sure you won’t be liable for any early repayment or break fees, as this could negate any interest savings you might make on the early repayment.
Make sure you understand any fees before signing an agreement with a lender.
Find the best rate on an asset finance loan
FIND YOUR RATENeed a new business vehicle or equipment for your business?
- Equipment finance
- Truck finance
- Business car loans
- Chattel mortgage
- Finance lease
- Commercial hire purchase (CHP)
- Operating lease
You can read our guide to compare the benefits of a chattel mortgage vs lease vs hire purchase.
Best uses for asset Asset Finance
Asset finance is popular with SMEs that have limited access to cash flow and would prefer to pay for assets over a set period. It can also be used for low-value assets — such as computers — which you plan to upgrade in a short time, or which will likely become obsolete.
Asset finance is commonly used if you:
- Work in an industry that requires constantly up-to-date technology
- Want to purchase an asset for everyday business use and reclaim the GST on their next BAS
Assets can include major investments, such as an office or warehouse, mid-range investments such as a company vehicle or manufacturing equipment, and minor assets, such as laptops, stock, furniture.
If you qualify for asset finance with a lender, you can finance almost any asset related to your business. This can include:
- Vehicles — e.g. company cars, trucks, trailers, delivery vans, motorcycles
- Electronics — e.g. computers, servers, GPS equipment
- Machinery — e.g. excavators, lifts and access equipment, forklifts
- Equipment — e.g. printing, medical, dental, engineering
- Construction — e.g. tools, trade vehicles, scaffolding
- Earthmoving — e.g. yellow goods, machinery, diggers, front loaders
Traditionally, getting a personalised rate may require exhaustive research and contacting a number of lenders directly, or paying a broker to assist in the process. The base-rate advertisements displayed on many 'comparison' sites are only the prime-borrower rate, and offer no indication of your rate, or whether you can get approved.
Money.com.au aims to clear up the confusion around rates and approval, so we can provide the best consumer experience possible. We only show you real, personalised rates from lenders who can give you approval on the loan. No hidden fees, no inflated rates, no stress, and no impact on your credit score.
Just real rates, from real lenders, who you can apply with immediately to get real deals. (Yes, really!)
Have a unique need for business finance?
Asset Finance Case Study
Type of business: Real Estate Agency
Loan amount: $35,000
Case: A retail agency has been operating for two and a half years and has gradually increased its sales potential and client book considerably in the previous six months.
The agency is now looking to take on new staff, but require additional company vehicles which can be branded with the agency’s logo and branding. Based on the projected sales figures for the next three months, the agency is confident it can hire a staff member and procure a vehicle to manage the increased sales activity.
The agency applies for finance and receives $35,000 to finance the purchase of the vehicle and additional marketing decals for the vehicle as well. The business makes steady repayments during the initial month of onboarding and training.
In the second month, the increased activity by the agency in both marketing itself and managing more properties allows for greater profits, which the agency uses to make additional repayments.
Instead of repaying the amount in full, the agency decides to refinance its initial loan for a further $35,000, repeating the process as the team grows again.
This time, the agency repays the loan amount in full during the third month of the loan term and decides to reassess its situation in the following year. The agency now has additional staff, additional vehicles, and a strong relationship with its lender.
Find the best rate on an asset finance loan
FIND YOUR RATEHow to qualify and apply for Asset Finance
Most banks will offer asset finance options to their customers. Otherwise, you could choose to work with a finance broker, who will help manage your application process.
If you’d like to see which lenders can offer you asset finance, you can use our smart form to compare offers from lenders in Australia.
Qualifying for asset finance is relatively simple. Most lenders will be able to provide plenty of options if you:
- Have been trading for at least 12 months; and
- Have an ABN (Australian Business Number); and
- Are registered for GST
Although the process will be a little more involved, you can still get asset finance if you:
- Are self-employed
- Are a sole trader
- Have been trading for less than 12 months
How to apply
The fastest approval speed will be offered by specialist lenders. Often, you can apply online and receive approval and finance within 24 hours. These lenders also offer a streamlined method of applying; many will allow you to compare offers and apply using our simple, online smart form.
However you choose to apply, you will need to demonstrate the ability to service your finance amount, and meet individual lender criteria, such as:
- An ABN and GST registration
- An acceptable credit rating
- A minimum level of turnover
- A maximum level of other debt
You may also be asked to provide additional supporting documents, which may include:
- Proof of identity
- Financial records (provided by your accountant)
- Profit and Loss Statements
- Balance Sheet
- Details of the asset you wish to purchase
- Business bank statements
- Rates notice (if you own a home)
- Rental agreement (if you are renting)
Business loan brokers can be found all across Australia — if you need a business loan and would like professional assistance in comparing your options, you can find business finance brokers in all major Australian cities; Sydney, Melbourne, Brisbane, Perth, Adelaide, Newcastle, and Canberra.
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Here are the most popular questions people are asking about asset finance:
What is an asset?
In a business context, an asset is any possession you’d record on your balance sheet. It could be a valuable resource like a building, a vehicle or a piece of equipment or technology. Or it could be something that fluctuates, like the stock in your warehouse or the cash in your bank account.
What is asset finance used for?
Asset finance is often used for business purchases that have a reasonable lifespan and cost a considerable amount of money. Most often, this will include business vehicles, IT equipment, and machinery.
What are the typical interest rates for asset finance?
For secured asset finance, where the assets are used as collateral, the interest rate is generally between 5% and 8%. Unsecured asset finance will generally have higher rates.
What type of fees can I expect to pay?
Fees for asset finance vary between lenders. In most instances, there will be an establishment fee and sometimes ongoing monthly admin fees.
Can I pay out my asset loan early?
Yes. In most instances, you can repay your loan or clear your financial debt through extra payments. However, some lenders may specify that there will be penalties for doing so. If you intend to pay out your loan early, it’s best to work with a lender who is more accepting of early payouts.
Can I get asset finance with a bad credit rating?
If you are applying for asset finance, lenders will generally look at the creditworthiness and serviceability of your business, instead of your credit rating. You may be able to find lenders who will approve asset finance even if you have a less-than-perfect credit score.
Want to know more about Business Loans?
About the Author
Shaun
McGowan
Shaun McGowan
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.