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Borrow from $5,000 to $500,000
Fixed or variable interest rates
Repayments to suit your budget
Terms from 1 month to 5 years
Secured & unsecured options
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
A finance lease allows a borrower to have the use of an asset (business equipment) and the benefits of ownership, while the lender retains actual ownership of the asset until the end of the lease. As all risk is transferred to the borrower, a finance lease will often have lower interest rates than other types of equipment finance.
A finance lease is a type of business equipment finance in Australia. A finance lease is used for long-term high-value assets — e.g. medical equipment or heavy machinery — and provides greater owner benefits for a borrower than an operating lease.
Suitable for high-value assets
Longer lease terms
Full ownership benefits
Borrower takes full responsibility
No options to upgrade your asset
Similar to standard small business finance
Both types of lease allow a business to access business equipment through regular finance repayments. The main difference between a finance lease and other types of lease is in ownership at the end of the lease term — a finance lease will allow a borrower to take ownership of the asset.
Ownership - Ownership of the property is transferred to the borrower at the end of the lease term.
Residual Payments - A balloon/residual option for the lessee to purchase the property or equipment at a specific price.
Running costs & administration - The borrower is responsible for all associated costs with owning and using the asset during the lease.
Accounting and Tax - The asset is listed on the business’s balance sheet. Lease payments are listed on profit and loss statements. Payments are generally tax-deductible.
The lender will purchase the asset on behalf of the customer, who then pays the lender a fixed monthly lease rental — plus interest — for the term of the lease.
At the end of the lease, the asset is often purchased by the business at an agreed price, or returned to the lender.
The asset is listed on the business’s balance sheet, and lease repayments to the lender are generally tax-deductible.
A finance lease uses fixed-rate payments, which ensures that repayments will stay the same regardless of changes to interest rates.
However, as the business takes full responsibility for the asset, it will also need to consider any additional costs such as repairs, maintenance, or servicing.
With a finance lease, you’ll pay close to the full value of the asset over the agreed term. Your lender will decide at the start of the contract how much they expect the asset to be worth by the end, and your final payment will be based on that anticipated value.
A finance lease is often used for high-value assets — such as medical equipment or business machinery — which the borrower intends to take ownership of at the end of the lease. The business will also benefit by claiming tax on its finance lease payments.
The business will have both the use of business equipment and the benefits of ownership, while the lender will have actual ownership of the asset.
This means you’ll be responsible for any maintenance and repairs, but it also means there is very low risk to the lender — which often results in lower rates.
Most businesses use a finance lease to purchase expensive assets while still maintaining operating cash flow and working capital. Residual payments are set at the start of a lease, which means a business can also profit if the asset’s value is higher than initially assessed.
You can apply for a finance lease the same you would for most equipment finance applications. You can qualify for an operating lease if you:
Have been trading for at least 12 months; and
Have an ABN; and
Are registered for GST; and
Have a clean credit history; and
Own property or can provide a 20% deposit
If you don’t meet the above criteria, you can still get approved if you:
Are self-employed or a sole trader
Have been trading for between 6 - 12 months
Have an imperfect credit history
Do not own property
There are two main types of applications, which will depend on the amount you wish to borrow. If you are borrowing less than $100,000 the approval process will be fairly simple. Most times, just your business bank statements will be sufficient to illustrate your monthly business revenue.
If you wish to borrow more than $100,000, your lender will require additional documentation to assess your application.
If this is the case, you’ll need to provide additional documentation to the lender so they can better assess your application. Here are some tips to improve your chances of getting approved. Here’s what you may need to provide to a lender when applying:
If you are borrowing less than $100,000:
Proof of identity
An ABN and GST registration
An acceptable credit rating — the lender will ask to conduct a credit check
Business bank statements
Trust Deed if the business is held in a trust
Australian Tax Office (ATO) Portal access.
If you are borrowing more than $100,000:
All the documentation provided if borrowing less than $100,000; and
Financial records (provided by your accountant)
Profit and Loss Statements
If you are making an application for more than $100,000, you can speak to your bank or a lender directly to discuss your financial circumstances and need for finance.
If you are applying for less than $100,000, you can generally apply online with a number of different specialist business finance lenders, including those who provide leases designed specifically for small businesses.
Lenders will assess an application based on the monthly revenue of the business, its intended use for the loan, how the loan will benefit future business revenue, and more.
Each lender will have different approval criteria, but here are some tips to improve your chances of getting approved.
Demonstrate an ability to service your business loan or lease.
Meet the lender's criteria for acceptable credit rating
Meet the lender's criteria for minimum turnover and maximum debt
Provide profit and loss statements and your business balance sheet
Provide details of the asset you wish to purchase
Provide read-only access to your business bank statements
Provide a personal guarantee by the director of the company
Finance lease interest rates will vary between lenders, however they will generally be lower than low-value-asset lease options and fit-out finance.
This is due to the value of the assets available under this lease option, which include high-value machinery and equipment which can serve as collateral on the loan amount.
Your personal and business financials will be taken into account when assessing your application, along with the type of asset you wish to finance and its age.
You can use the Money.com.au smart form to compare loan offers from real Australian lenders and apply directly from your results. These lenders offer the fastest approval speed in return for charging higher interest rates than a bank.
The main benefit of a finance lease is flexibility at the end of the lease term. In general, the cost of the asset will be spread across the lease repayments, and will include a residual amount determined by the lender at the start of the contract.
At the end of the lease, you’ll have the option to purchase the asset and assume full ownership. If the asset is worth more than the residual, the business will profit from the purchase.
Generally offers ownership at the end of the lease
Doesn’t require a deposit or security — other than the asset financed
Your equipment does not sit on your books as an asset or liability
Immediate access to your business equipment once purchased
Repayments may be tax-deductible
Responsible for maintenance and running costs
Responsible for repairs and damage
Rental payments can be tailored over the term of the agreement
Fixed repayments over a set term
Residual value of the asset is calculated upfront