Asset Finance
Even if the business climate feels challenging, many Australians are still taking the plunge head on. Businesses have surged, with nearly 300,000 more businesses operating now versus pre-pandemic years.
As we have seen over the past 20 years-the ability to grow and maintain business cash flow ultimately comes down to access to capital, either through direct investment or through borrowing, and this holds true whatever industry you are in. But the challenge remains for many entrepreneurs – maximising opportunities while handling financial constraints.
If you are self-employed or a business owner looking to complete or upgrade your operations, you can access asset financing from big banks or specialist lenders. This type of loan is designed to help businesses acquire big ticket items, whether tangible or tech based. And ultimately understanding the nuances of these loans needs a specialist broker.
Let’s explore how asset finance works, the potential benefits for borrowers, and what to consider when applying for this type of financing.
What is asset finance?
Asset finance is a kind of business loan that is meant to purchase assets needed for operations without needing to buy them upfront. It’s for businesses that are looking to rent or lease equipment, technology, and products but keep their working capital intact.
Stats about Australian businesses show that the largest growing sectors include construction, scientific and technical services, real estate services, agriculture, and healthcare. These industries have respective machinery, software, and tangible asset needs.
Whatever the industry, accessing asset finance enables you to stagger asset payments. So instead of making a significant capital expenditure, your business spreads the cost of acquiring business equipment over a given period through regular repayments. Companies have to use the loan to fund an asset or equipment and have a game plan whether you are renting or leasing.
How much can I borrow?
Depending on your business’ specific circumstances and revenue background, asset finance can range from thousands up to millions if needed. Working with a loan specialist brokerage like Intellichoice lets you access the lowest rates provided by banks, where you can choose from 30+ lenders. At the moment, the lowest rates for business loans are at around 3.65% p.a.
Speak to our business financing specialists today – we’ll be happy to answer any questions about asset finance.
What should be my top considerations in asset finance?
ABN age and activity – Lenders look at risk to see if the client can keep the monthly repayments. So those with a short trading history may not be able to demonstrate consistent income to handle the loan. But there are certain instances when a new ABN can be approved due to business continuance.
Preservation of capital – opting for asset finance enables business owners to preserve their working capital. Instead of using a substantial amount of cash to purchase assets outright, they can use asset finance to spread the cost over time. This allows them to allocate their capital to other crucial aspects of the business, such as marketing, expansion, or hiring.
Balloon repayments – A balloon repayment is a lump sum repayment at the end of the loan term, once your regular monthly repayments have been posted. Balloon repayment option can keep your monthly fees lower but with higher interest overall. It can be useful for clients who can expect bigger capital in the future.
Range of financing options – Asset finance runs the gamut from vendor equipment, office equipment and furnishings, software tech, industrial machinery, and more. Your business can apply for a commercial loan, rental finance lease, or a line of credit depending on the situation and requirements.
Energy finance – Companies that are ready to commit to more sustainable energy assets, including solar, wind, waste energy efficient systems, and battery storage can use asset finance for this equipment.
Tax benefits – Depending on the structure of the asset finance agreement and local tax regulations, businesses may enjoy certain tax benefits. For instance, lease payments are often tax-deductible as a business expense. Going the asset finance route could make for less costs overall.
What are the requirements for asset finance?
Lenders may vary with their request, but here are the general requirements to prepare:
· You are an active ABN holder
· Plan showing that the equipment/vehicle/technology will be used for business purposes
· Valid ID (e.g., passport, Medicare card, driver’s licence)
· Financial statements from an accountant
· Bank statements (can be from 2 months or more)
· Recent Business Activity Statement (BAS)
· ATO Tax Agent portal report
· Accountant letter confirming business activity
· Income tax report
We can provide detailed information about how to go about your asset finance application, and we can assist clients who may have a difficult time producing essential documentation. Our low-doc business loans could be another pathway to financing your needs. Speak to our Intellichoice loan professionals today to learn about your specific options.
