Asset finance for small businesses, self-employed, and contractors.

What is asset finance?

Asset Finance is usually taken to help a business acquire the tools it needs to grow or deliver its value proposition by being able to fund the purchase over a period of time, instead of having to fund the asset 100% upfront.

It is a great way to reduce the initial outlay for such capital investments.

What type of questions are usually asked when searching for finance options?

Some questions that you may be asked include:

  • What type of asset are you needing to finance?
  • Do you work full-time or are you self-employed?
  • If you are self-employed – How long for? Are you ABN registered? Are you GST registered?
  • Who do you work for?
  • How long have you worked there?
  • What is your role?
  • Will you be using the asset for business or personal use?
  • What key features are you looking for in the loan? i.e. flexibility, pay it down fast, etc
  • What other loans have you had?
  • Are you currently paying off any other loans?
  • What does your credit file look like?

What types of assets can I finance?

Common assets that are financed include:

  • Cars
  • Trucks
  • Boats
  • Jet skis
  • Caravans
  • Motor bikes
  • Gym equipment
  • Photocopiers
  • Printers
  • Computers
  • Yellow Goods
  • Software
    …and the list goes on!

What types of asset finance options are available?

There are several types of asset finance loans available depending on your circumstances. They can include:

– Chattel Mortgage

Rather than outlaying the full value of the car up front, your business makes structured payments over the term of the loan. You take ownership of the vehicle at the time of purchase – but the lender also takes out a ‘mortgage’ over the vehicle as security for the loan. At the end of the loan term, and any residual value is paid, your business has clear title to the car. Alternatively, you may trade in the vehicle or refinance the residual value.

– Equipment leasing

Here, the lender purchases the equipment, except they lease it to you without transfer of ownership. You just pay rent to use the equipment over an agreed period.

– Purchase hire purchase

With a purchase hire agreement, the lender purchases the equipment on your behalf and you are required to make regular repayments. You only own the equipment once you have completed the final repayment.

– Finance lease

You rent the asset from the purchaser of the equipment, however, with the option to purchase the asset at the end of the lease term.

– Operating lease

Usually a short-term lease option, you will have access to the asset as long as you are making your regular repayments. There is no option to purchase the asset at the end of the lease term.

– Asset refinance

Similar to a home loan refinance, asset refinance allows you to release cash from items you already own.

What is the average term for an asset finance loan?

Asset finance loan terms differ from loan to loan. They can be anywhere between one to ten years, depending on a number of variables that you should discuss with your finance specialist.

Is asset finance an option for the self-employed?

Using asset finance is a great way to fund the required equipment that you need to support your business or fund the asset you are needing.

There may be potential tax benefits that may make it attractive to use for this type of finance arrangement. Such benefits are best discussed with your accountant.

Can you secure an asset finance loan if you are an independent contractor?

There are many solutions that might be beneficial to meet your needs. Speak to your loan finance specialist to discuss these options.

Can I obtain asset finance if my ABN is less than 12 months old?

Although this can be tougher to obtain, there may be options that can help those with ABN’s that are less than 12 months old, particularly if you have another existing ABN that is older than 12 months.

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Disclaimer:

This article is written to provide a summary and general overview of the subject matter covered for your information only. Every effort has been made to ensure the information in the article is current, accurate and reliable. This article has been prepared without taking into account your objectives, personal circumstances, financial situation or needs. You should consider whether it is appropriate for your circumstances. You should seek your own independent legal, financial and taxation advice before acting or relying on any of the content contained in the articles and review any relevant Product Disclosure Statement (PDS), Terms and Conditions (T&C) or Financial Services Guide (FSG).

Please consult your financial advisor, solicitor or accountant before acting on information contained in this publication.