What can business asset finance be used for?
Business asset finance is commonly used to fund assets that are used for business purposes. That might include a vehicle, ute, van, truck, trailer, forklift, excavator, medical equipment, dental equipment, manufacturing machinery, hospitality equipment, gym equipment, IT hardware or fit-out related equipment.
The key point is that the asset usually needs to support the business. This is different to a personal car loan or consumer finance, where the asset is mainly for private use.
Common types of business asset finance
There are different ways to structure asset finance. The most suitable option will depend on the asset, the business, the lender and your accountant’s advice.
- Chattel mortgage or equipment loan: the business generally owns the asset from the start and repays the loan over an agreed term.
- Finance lease: the lender purchases the asset and leases it to the business over the term.
- Hire purchase: the business uses the asset while making payments, with ownership transferring once the agreement is complete.
- Asset refinance: an existing business asset may be used to release cash or restructure existing debt, depending on lender policy.
- Low doc or alt doc asset finance: some lenders may consider applications where full financials are not available, but other supporting evidence is required.
These terms are often used differently across lenders, so it is worth checking the detail rather than relying on the product name alone.
How lenders assess a business asset finance application
Lenders want to understand whether the business can afford the repayments and whether the asset makes sense for the business. The stronger and clearer the application, the easier it is for a lender to assess.
- Business trading history, ABN, GST registration and industry type.
- Business bank statements and cash flow trends.
- Recent financial statements, tax returns or BAS, depending on the lender and loan size.
- The type, age and value of the asset being purchased.
- The director or guarantor profile, including credit history.
- Existing business debts, ATO obligations and other finance commitments.
- The proposed loan term, deposit, balloon or residual amount and repayment structure.
A newer business, seasonal business or rapidly growing business may still have options, but the lender will usually want a clearer explanation of the story behind the numbers.
Why businesses use asset finance instead of paying cash
Paying cash can be simple, but it is not always the best use of working capital. Many businesses prefer to keep cash available for stock, wages, tax, marketing, rent, supplier payments or unexpected costs.
Asset finance can also help align the cost of the asset with the income it helps generate. For example, a new van, excavator or piece of machinery may allow the business to take on more work, improve turnaround times or replace an ageing asset that is becoming unreliable.
The main trade-offs to consider
A lower monthly repayment is not always the whole story. When comparing business asset finance options, it is important to look at the full structure.
- Interest rate and fees: compare the total cost, not just the advertised rate.
- Loan term: a longer term may reduce monthly repayments, but can increase total interest paid.
- Balloon or residual: this may reduce repayments during the term, but leaves a larger amount payable at the end.
- Deposit: some lenders may require a deposit depending on the asset and application strength.
- Asset age and condition: older or specialised assets can limit lender options.
- Early payout rules: check how flexible the loan is if you upgrade, sell or refinance the asset later.
Your accountant should also be involved where tax treatment, depreciation, GST or ownership structure matters. Lending advice and tax advice are different, and both can be important.
How a broker can help with business asset finance
Business asset finance can move quickly, but speed should not come at the expense of structure. A broker can help compare lenders, package the application properly and explain what each option means in plain English.
At Manson Financial Services, the focus is on understanding what the asset is meant to do for the business, then helping you find an option that fits the purchase, the cash flow and the bigger picture.
