What is Asset Finance?
Asset finance is a funding solution that enables businesses to acquire essential equipment, vehicles, and machinery without paying the full purchase price upfront. Whether you're buying new equipment, upgrading existing equipment, or expanding your operations, asset finance provides a practical way to preserve working capital while accessing the assets your business needs to operate and grow.
For Kewdale businesses, asset finance offers access to a wide range of funding options from banks and lenders across Australia. From work vehicles and office equipment to specialised machinery and technology equipment finance, these solutions are designed to match your specific business needs.
Types of Asset Finance Options
Understanding the different finance options available is essential for making informed decisions about your business equipment funding. Here are the main types of asset finance:
Chattel Mortgage
A chattel mortgage is a popular choice for businesses purchasing assets. You own the asset from day one, and the lender takes security over it as collateral. This option typically features fixed monthly repayments and potential tax benefits through depreciation claims. Many businesses use chattel mortgages for commercial vehicle finance and equipment purchases.
Finance Lease
With a finance lease, the lender owns the asset throughout the life of the lease, while you use it for your business operations. This structure can offer specific GST treatment advantages and helps manage cashflow through predictable payments. At the end of the lease term, you typically have options to purchase the asset, refinance, or upgrade.
Operating Lease
An operating lease suits businesses that want to use equipment without ownership obligations. This option is particularly useful for assets with a short upgrade cycle, such as technology equipment or vehicles. The lender retains ownership, and you make regular lease payments for the right to use the asset.
Hire Purchase
Hire purchase agreements allow you to use an asset while making regular payments. Unlike a chattel mortgage, you don't own the asset until the final payment is made. This option can be suitable for various assets, including commercial equipment finance and construction equipment finance needs.
What Can You Finance?
Asset finance covers an extensive range of business assets:
- Commercial vehicles: Cars, trucks, trailers, and work vehicles for your business operations
- Construction equipment: Excavators, tractors, graders, cranes, and dozers
- Medical equipment: Specialised healthcare technology and medical equipment finance for practices and clinics
- Hospitality equipment: Kitchen appliances, furniture, and commercial-grade hospitality equipment finance
- Office equipment: Computers, furniture, and essential workplace items
- Factory machinery: Manufacturing and production equipment
- Technology equipment: IT infrastructure and software systems
Understanding Key Finance Terms
Interest Rate
The interest rate determines the cost of borrowing. Rates can be fixed or variable, depending on the finance structure and lender. Fixed rates provide certainty with consistent repayments throughout the loan term.
Loan Amount
The loan amount represents the total funds borrowed to acquire the asset. Lenders typically finance up to 100% of the asset value, though this varies based on the asset type and your business circumstances.
Balloon Payment
A balloon payment is a larger final payment at the end of the loan term. This structure reduces your fixed monthly repayments during the loan period, helping to manage cashflow. The balloon amount is set as a percentage of the asset value.
Benefits of Asset Finance
Asset finance provides several advantages for Kewdale businesses:
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Preserve Working Capital: Instead of depleting cash reserves, asset finance allows you to maintain liquidity for operational expenses and opportunities.
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Tax Benefits: Depending on the finance structure, you may claim depreciation, interest, and lease payments as business expenses. Consult your tax adviser for specific guidance.
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Access to Latest Equipment: Regular upgrade options ensure your business operates with current technology and machinery, maintaining competitive advantage.
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Flexible Structures: Various finance options mean you can tailor the arrangement to suit your business growth plans and cashflow requirements.
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Asset-Based Lending: The asset itself serves as collateral, often making approval more accessible than unsecured business funding.
Vendor Finance and Dealer Finance
Many equipment suppliers offer vendor finance or dealer finance arrangements. These can provide convenient funding at the point of purchase, though it's worth comparing these options with other market alternatives to ensure you're receiving suitable terms for your circumstances.
Fleet Finance Solutions
Businesses operating multiple vehicles can benefit from fleet finance arrangements. This approach streamlines the management of commercial vehicle finance across your entire fleet, providing consistent terms and simplified administration.
Choosing the Right Asset Finance Structure
Selecting the appropriate finance option depends on several factors:
- Your business structure and tax position
- The type of asset being acquired
- Your cashflow requirements and financial position
- How long you intend to use the asset
- Whether you want ownership or prefer to lease
- The asset's expected upgrade cycle
Working with experienced finance professionals helps ensure you understand the implications of each option and select the structure that aligns with your business objectives.
Getting Started with Asset Finance
The asset finance process typically involves:
- Identifying your business needs and the required asset
- Determining your preferred finance structure
- Submitting an application with financial documentation
- Receiving approval and reviewing terms
- Completing documentation and acquiring your asset
At Freo Finance, we work with businesses throughout Kewdale to access Asset Finance options from banks and lenders across Australia. Our team understands the specific requirements of various industries, from truck and equipment finance to medical equipment finance and everything in between.
Whether you need a single piece of machinery or comprehensive fleet finance for your expanding business, professional guidance ensures you structure your funding appropriately and understand the commitments involved.
Ready to explore how asset finance can support your business equipment and machinery purchases? Call one of our team or book an appointment at a time that works for you. We'll discuss your specific requirements and help you understand the finance options available for your Kewdale business.
