Compare Your Best Asset Finance Options & Rates

Asset finance is an umbrella term for business loans or lease products used to finance various business assets. This can include company vehicles, fleets, and all sorts of business equipment, plant, machinery and even office fit-outs.

The length of the asset loan or lease will vary based on the type of asset you’re financing and the product's lifespan. Asset finance can be used to buy new assets or replace and upgrade existing ones.

Eligibility requirements for asset finance will vary between lenders, but generally include:

• Australian citizenship or permanent residency
• An active ABN or ACN
• At least six to 12 months of trading history
• Your business must be GST-registered
• You must be able to provide bank statements and other proof of eligibility
• A good credit score — the minimum credit score for business lending is around 475 (it could be less if you’re a homeowner)
• You must be purchasing or leasing an asset used at least 51% of the time for business

Who is asset finance suitable for?

Asset finance is typically suitable for:

• Sole traders and businesses who want to spread out the acquisition cost of assets or equipment over multiple months or years to retain working capital
• Businesses with limited cash flow who need to buy assets for everyday use or to scale their operations
• Businesses that need to lease assets or equipment over a limited period of time (e.g. construction companies often lease excavators and bulldozers for specific projects)
• Businesses in industries that require up-to-date technology or who need to update the asset(s) during the lease term (e.g. healthcare, airlines).

With an asset loan (also known as a chattel mortgage), you borrow money from the lender to purchase a business asset, such as a vehicle or equipment. The asset serves as collateral for the loan, which you repay with interest in regular instalments over a fixed term, similar to a mortgage.

Your business has full ownership of the asset from the outset and is responsible for all maintenance and registration costs. However, if you default on the loan, the lender can repossess the asset. The asset will be registered on the Personal Property Securities Register (PPSR) until you repay the loan. This lets other lenders know there’s a security interest on the asset.

Once you've fully paid off the asset loan, you’ll have unconditional ownership of the vehicle and the asset will be removed from the PPSR. If there’s a balloon payment at the end of the finance term, you’ll have a couple of options:

1. Pay the residual balloon and decide whether to keep or sell the asset.
2. Refinance the balloon amount into a new loan and pay it off in regular instalments (with interest).
3. Trade your asset for another one with a new finance agreement, settling the balloon amount as part of the trade-in process.

An asset loan is a popular option for small businesses with vehicle fleets and for manufacturing industries, construction companies, tradespeople and transport companies. ‘Vehicles or transport’ is by far the most common reason businesses request finance through Money.com.au (41.50% of all requests).

You can also acquire business assets through a lease. This means you’ll have full use of the asset, but won’t own it until you make a final balloon payment or you may forgo ownership and continue leasing the asset. There are two main types of asset leases:

1. Finance lease

Under a finance lease, the lender buys the asset on your behalf and leases it to you in exchange for regular payments, plus interest, over a fixed period. You’ll get the benefits and responsibilities of ownership (including upkeep costs), but the lender retains actual ownership of the asset during the lease term. Some leasing agreements include maintenance and servicing costs as part of the contract.

Depending on your agreement, you’ll have a few options at the end of a finance lease term:

1. Pay the pre-agreed residual amount and return the asset at the end of the lease term.
2. Buy the asset from the lender by making a final residual payment. If the asset's value exceeds the residual amount, your business can profit from the purchase by selling the asset. But, your business could also incur a loss if you sell the asset for less than the residual amount.
3. Refinance the residual amount into a new lease agreement.
4. Trade in your current asset to purchase another under a new finance agreement. You could use the proceeds from the trade-in to pay the balloon payment.

A finance lease is generally suitable for high-value assets or assets with a longer lifespan, like company vehicles, heavy machinery and specialised equipment. It provides more owner benefits (i.e. unrestricted use of the asset with the option to buy it at the end of the lease term) for a borrower than an operating lease.

2. Operating lease

An operating lease also allows your business to lease an asset in exchange for regular fixed repayments (or based on usage), including servicing and maintenance costs. You can commonly upgrade the asset or equipment within the lease period, but there’s no option to own the asset at the end of the contract.

Depending on your agreement, you’ll have a two options at the end of an operating lease term:

1. Return the asset to the lessor at the end of the lease term (the asset is then usually sold to a third party on behalf of the lessor).
2. Renew the lease under new terms.

Operating leases are shorter-term agreements commonly used for assets that need to be upgraded frequently, like IT equipment, payment or telecommunication systems, etc.