Many businesses are looking for ways to improve their cash flow and to simplify their accounting.

Asset finance can be an efficient way to manage your cash flow to fund vehicles, machinery and other equipment. Preserving your capital through asset financing can provide you with the money and the hardware needed to expand your business.

You can also reduce the risk of owning obsolete equipment and there can be various tax outcomes too.

Regular fixed payments on a lease or a loan can help your business iron out cash flow and simplify accounting.

When considering asset finance options, ask yourself:

  • how much capital do I need to grow my business?
  • when do I need to smooth the bumps in my cash flow?
  • what are the tax outcomes of asset financing?
  • how long will I need the equipment and will I need to upgrade it?
  • is technology rapidly changing in my industry?
  • do I want to ‘finance to own’ or ‘finance to return’ my asset?

Generally speaking, main asset finance options for businesses include Commercial Hire Purchases, Financial and Operating Leases and Chattel Mortgages. Each is suited to different commercial circumstances, so when considering your options, you may want to talk to your accountant or tax advisor. Below is an introduction to these main types of asset finance.

Commercial Hire Purchase

With this type of finance, you hire and use the asset until the last payment. When you make the final instalment, title of the asset transfers to you. You can tailor payment options, including the loan period, a deposit and a larger final balloon payment.

Chattel Mortgage

Chattel Mortgages are a popular finance solution where you own the asset from the outset and your loan agreement is secured by the asset. You can tailor your loan payments by choosing the term — typically up to five years. Other payment options can include a deposit and a larger final instalment.

Finance Lease

With a Finance Lease, the financier owns the asset however you bear the risk of disposal (of the asset) at the end of lease. This type of lease can benefit businesses that need the latest vehicles or equipment without tying up a large amount of capital. You can choose lease payments in advance or arrears and terms up to five years. A residual value is required in line with the asset’s use and the Australian Taxation Office’s guidelines.

Operating Lease

Operating Lease can often be used to fund a number of different assets. Payments towards this type of finance can sometimes be considered operating costs and will not appear as a liability on your balance sheet.

Regular payments

Regular, fixed payments on a lease or a loan can help your business iron out cash flow into a smooth and predictable stream. Your accounting can also be made easier when reporting expenses and you don’t have to keep large amounts of capital aside for equipment.

Depending on your requirements, the equipment you can finance with regular fixed payments includes:

  • light and heavy commercial vehicles
  • plant and machinery
  • earthmoving and construction equipment
  • dental, medical and veterinary equipment

Asset finance is usually set over a period of one year through to seven years. There are a lot of very competitive rates for asset finance – some as low as some home loan rates.

Can we help you?

If you are searching for a suitable asset finance for your business, please contact us for a consultation. Contact us