Asset Finance
Asset finance involves leveraging business assets to help your business to grow. This can involve:
- 1 Taking out a business asset financing loan to finance the purchase of new technology, equipment or tools. This allows businesses to acquire the assets they need to expand their operations, increase productivity, and stay competitive in their industry.
- 2 Borrowing against the value of your existing assets. By using your current assets as collateral, you can secure an asset finance loan to fund other business expenses or investments, such as hiring new employees, purchasing inventory, or expanding into new markets.
Asset finance is a flexible and accessible financing option for businesses of all sizes and industries. Whether you’re a startup looking to purchase your first equipment or an established company looking to upgrade your technology, asset finance Melbourne can provide the funding you need to achieve your goals.
Types of asset finance
The major types of business asset financing include:
SECURED BUSINESS LOANS
Secured business loans require you to provide a business asset that you already own as collateral security for the lender in return for providing you with the funds you need. Secured loans can be a good option if you don’t qualify for an unsecured loan due to your credit history or if you need a larger amount of funding than an unsecured loan can provide.
However, it’s important to understand that if you default on your secured business asset financing loan repayments, asset finance providers can seize and sell your asset to recover any outstanding debt. This means that you could lose valuable business assets if you’re unable to make your loan payments on time.
Secured business loan interest and associated fees and charges are tax-deductible against your business income, provided the asset is used in your business. This can help to offset the cost of borrowing and make secured loans a more affordable financing option for some businesses.
FINANCE LEASES
Finance leases allow you to rent a business asset for a specific time period. Ownership of the asset remains with the lender, but you get to use it for the lease term and you’re usually responsible for any costs of maintaining it. This can be a good option for businesses that need to use an asset for a short period of time or that want to avoid the upfront cost of purchasing the asset outright.
Your rental payments on a leased asset are tax-deductible against business income. This means that you can claim a tax deduction for the portion of your lease payments that relate to the business use of the asset, which can help to reduce your overall tax liability.
Finance leases can also provide greater flexibility than other types of asset finance, as you may have the option to upgrade or replace the asset at the end of the lease term. This can be particularly useful for businesses that rely on technology or equipment that becomes outdated quickly.
OPERATING LEASES
An operating lease is similar to a finance lease, except that the asset owner (the lender) is responsible for the costs of any asset maintenance. This can be a good option for businesses that want to use an asset without taking on the responsibility of maintaining it themselves.
Operating leases can also provide greater flexibility than finance leases, as they often have shorter lease terms and may allow for early termination or asset upgrades. However, they may also have higher monthly payments than finance leases, as the lender is taking on more risk by covering the maintenance costs.
HIRE PURCHASE
A hire purchase agreement involves you hiring the business asset from the lender for an agreed term. When you make your last hire payment, the ownership of the asset transfers to your business. This can be a good option for businesses that want to eventually own the asset outright but don’t have the funds to purchase it upfront.
Hire purchase agreements typically require a deposit or down payment, followed by regular payments over the agreed term. The payments are usually fixed and include both the principal amount and interest charges.
One advantage of hire purchase agreements is that they can provide a clear path to ownership of the asset. However, they may also have higher overall costs than other types of asset finance, as you’ll be paying interest on the full purchase price of the asset over the term of the agreement.
NOVATED LEASES
A novated lease can be taken out on a new business vehicle as part of a tax-effective salary packaging arrangement for you or your staff. Ownership of the vehicle remains with the lender, while repayments are deducted from you or your employee’s before-tax salary. This can provide significant tax savings for both the business and the employee.
Novated leases can be a good option for businesses that want to provide their employees with a vehicle as part of their remuneration package. They can also be used by business owners or sole traders who want to lease a vehicle for both business and personal use.
One advantage of novated leases is that they can be more cost-effective than other types of vehicle finance, as the repayments are made with pre-tax dollars. However, they may also have higher ongoing costs than other types of leases, as the employee is responsible for paying for fuel, maintenance, and other running costs.
CHATTEL MORTGAGES
A chattel mortgage is another option for financing a new business vehicle. It involves a lender providing you with a business asset financing loan that’s secured against the vehicle via a mortgage.
Like any secured loan, asset finance companies can repossess a vehicle under a chattel mortgage arrangement if you default on your regular loan repayments. When you have repaid the loan in full, the lender releases the mortgage and you own the vehicle outright.
Chattel mortgages can be a good option for businesses that want to own their vehicles outright but don’t have the funds to purchase them upfront. They can also provide tax advantages, as the interest charges and depreciation on the vehicle may be tax-deductible.
However, chattel mortgages may also have higher upfront costs than other types of vehicle finance, as you’ll need to pay a deposit or down payment on the vehicle. They may also have higher ongoing costs than leases, as you’ll be responsible for all maintenance and running costs.
Key asset financing considerations
The right commercial asset finance solutions will depend on your individual business needs and financial situation. Key considerations for asset finance or equipment finance include:
- Asset finance interest rates, fees and other financial terms and conditions: It’s important to compare the costs of different asset finance options to ensure that you’re getting the best deal for your business. This includes looking at the interest rates, fees, and other charges associated with each option.
- Repayment flexibility to suit your business’ cash flow: Different asset finance options may have different repayment structures, such as fixed or variable payments, balloon payments, or seasonal payments. It’s important to choose a repayment structure that suits your business’ cash flow and budget.
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- The tax-deductibility of your repayments: Some types of asset finance, such as chattel mortgages and finance leases, may provide tax advantages for businesses. It’s important to speak with a tax professional to understand how different asset finance options may impact your tax liabilities.
- How much finance you need: The amount of finance you need will depend on the type and value of the asset you’re looking to purchase or lease. It’s important to borrow only what you need and can afford to repay, to avoid taking on too much debt.
- The asset finance term (which usually ranges from one to seven years): The length of the asset finance term will impact the size of your regular repayments and the total amount of interest you’ll pay over the life of the loan or lease. It’s important to choose a term that balances your short-term cash flow needs with your long-term business goals.
- Whether it’s better to own or lease your asset: Depending on your business needs and financial situation, it may be more beneficial to own or lease your asset. For example, leasing your equipment may allow you to upgrade more easily as technology inevitably improves over time, while owning your asset outright may provide greater control and flexibility over how you use and maintain it.
How we can help Business asset finance and equipment finance can have serious implications for both your cash flow and your ability to grow your business. It’s important to understand the pros and cons of different asset financing options so you can choose the most appropriate one for your business.
At ARG Finance, our experienced asset finance broker can help you to find the right option. We’ll take the time to understand your business’ needs, goals and financial circumstances before recommending appropriate asset finance lenders and asset financing options for you.
Whether you want asset finance for startups or need an asset finance repayment calculator, you can count on us to advise and assist you in all areas of asset finance in Melbourne. We have extensive experience working with businesses of all sizes and industries, and we can help you navigate the complex world of asset finance to find the best solution for your needs.
Our team can help you compare different asset finance options, including secured loans, finance leases, operating leases, hire purchase agreements, novated leases, and chattel mortgages. We’ll work with you to understand your business goals and financial situation, and provide tailored recommendations based on your unique circumstances.
We can also assist with the application process, including preparing and submitting documentation, negotiating with lenders, and securing the best possible terms and rates for your asset finance loan. Our goal is to make the process as simple and stress-free as possible, so you can focus on running and growing your business.
In addition to helping you secure asset finance, we can also provide ongoing support and advice to help you manage your finances and achieve your long-term business goals. This may include regular check-ins to review your asset finance arrangements, as well as guidance on budgeting, cash flow management, and financial planning.
At ARG Finance, we’re committed to providing our clients with the highest level of service and support. We understand that every business is unique, and we take a personalized approach to ensure that we’re meeting your individual needs and goals.
So if you’re looking for asset finance in Melbourne, look no further than ARG Finance. Contact us today to find out how our asset finance services can help your business with short-term asset finance or financing of long-term assets. We’re here to help you achieve your business dreams and reach your full potential.
Frequently Asked Questions
?
Asset financing is a strategy that allows businesses and individuals to acquire assets without making full upfront payments. It involves obtaining loans or leases to purchase equipment, machinery or other valuable items essential for operations. The assets themselves serve as collateral, making it a secure form of financing. This method enables businesses to access necessary resources while managing cash flow effectively.
?
Asset finance involves obtaining funds to purchase assets such as equipment, machinery or vehicles. Instead of paying the full cost upfront, the borrower makes regular payments over a fixed period, with interest. The asset serves as collateral, reducing the lender’s risk. Once the term ends and all payments are made, the borrower gains full ownership. This method enables businesses to acquire essential assets without significant initial expenses.
?
Yes, small businesses and start-ups can typically access asset finance. Lenders may consider factors like the business’s credit score, cash flow and the value of the asset being financed.
?
Getting an asset loan with bad credit can be challenging, but not impossible. Some lenders might still consider your application, although you may face higher interest rates or stricter terms. It’s essential to research and compare options from different lenders to find the right option. Improving your credit over time can increase your chances of obtaining more favourable asset finance in the future.
?
Firstly, there’s a maturity mismatch, leading to potential liquidity issues if short-term liabilities can’t be rolled over or refinanced. Secondly, fluctuating interest rates may increase borrowing costs, affecting profitability. Additionally, if short-term lenders demand repayment during an economic downturn, the business may face distress. Long-term assets may not be easily sold or converted to cover liabilities, resulting in potential insolvency.
How we can help
Business asset finance and equipment finance can have serious implications for both your cash flow and your ability to grow your business. It’s important to understand the pros and cons of different asset financing options so you can choose the most appropriate one for your business.
At ARG Finance, our experienced asset finance broker can help you to find the right option. We’ll take the time to understand your business’ needs, goals and financial circumstances before recommending appropriate asset finance lenders and asset financing options for you. Whether you want asset finance for startups or need an asset finance repayment calculator, you can count on us to advise and assist you in all areas of asset finance in Melbourne.
Contact us today to find how our asset finance services can help your business with short-term asset finance or financing of long-term assets.
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