that Businesses raise capital to invest in new projects and grow. This can be achieved through retained earnings, debt capital and equity capital. Asset financing is a form of debt capital where businesses borrow from lenders to finance the equipment they require for their business.
Asset financing helps businesses acquire assets such as machinery, equipment, and vehicles when they are not in a position to make outright cash payments.
Types of Asset Finance
- Finance Lease
Also referred to as a capital lease. The leasing firm buys the equipment (lessor) and rents it to a business (lessee). The lessee makes monthly payments with interest to the lessor until the total cost of the equipment is repaid.. However, the equipment’s insurance and maintenance costs remain the lessee’s responsibility. The lease repayments may be claimed as a tax deduction (refer to your accountant for tax advice on this type of finance).
- Hire Purchase
When purchasing assets or equipment for your business, hire purchase allows you to pay in regular monthly instalments until the total value of the asset is settled. After completing all payments, the asset is transferred to you.
- Chattel Mortgage
Chattel Mortgage is a form of asset finance that allows a business to purchase the asset in their own name which has the benefits of claiming the interest cost and the depreciation of the asset as a tax deduction. A further benefit is the ability to claim the GST on the equipment in the next BAS period (refer to your accountant for tax advice on this type of finance).
What are the Advantages of Asset Finance?
Asset finance allows businesses to grow continuously by generating additional revenue through access to the necessary equipment. Here are other benefits:
- Increased Cash Flow
With flexible payment terms offered by asset financing, businesses can retain and increase cash flow as payments stretch over time.
- Fewer Upfront Costs
The ability to acquire an asset without committing a large sum is a significant advantage.
- Taxation Benefits
Refer to your accountant for taxation advice for the taxation benefits of using finance to purchase equipment.
- No Collateral
In most cases, the asset itself is the collateral. Therefore, signing up for your house as security is not necessary when funding an asset.
Asset Financing with Peel Finance Brokers
No matter the asset you wish to finance, Peel Finance Brokers are ready to tailor-make flexible solutions for your business. Get in touch with us today to spur your business into growth!
Dip. of Management (Deacon University)
Dip. of Finance/Mortgage Broking Mgt.
Assoc. Cert. of Business (Real Estate)
Assoc. of Mort. Ind. Assoc. of Aust. (AMIAA)
Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.