Discover how asset finance works and how businesses can use it to acquire essential equipment and vehicles. Learn about financing options, benefits, and key steps.
When running a business, the old saying is true: time is money. In order to meet its market demands, both in terms of product and services, businesses need to be agile to seize new opportunities, tackle challenges head-on and look for ways to innovate.
In many instances, a business’s assets – it’s tools of trade – are essential in maintaining its service offering in order to generate revenue.
That’s where asset finance can help. Regardless of industry, asset finance products can support businesses with fast access to funds so that can acquire a range of high-value assets – like vehicles and new equipment – when they need it most.
In this blog we’ll take a deep dive into the types of asset finance products available, and what businesses can use them to purchase.
What is Asset Finance?
In a nutshell, tertiary asset finance products are designed to help businesses acquire high-value items they need.
Businesses use asset finance as a cost-effective way to get business-essential tools and items when needed, without the hefty outlay of an up-front purchase. Some of the assets businesses may choose to finance include vehicles, heavy machinery and tools of trade like specialist industrial equipment.
Key Benefits of Asset Finance
Aside from the immediate cost savings often attributed to sustainable assets, there are several other key advantages when it comes to financing green equipment, including:
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Regular loan or lease payments are made over time, as opposed to one lump sum.
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Businesses can use finance products to get assets they may not have the liquidity to purchase outright.
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Like many financial products for business assets, businesses may be able to benefit from a range of tax advantages, such as claiming asset depreciation and any interest accrued on the loan.
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Because asset finance products are tailored to suit each individual business’s needs and the kind of assets they require, there is great flexibility in options both in terms of the type of finance available, and how a payment schedule is structured.
How Asset Finance Works – Step by Step
Asset finance is a way for businesses to acquire necessary equipment, vehicles and machinery without large, and often unfeasible, upfront costs.
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As with any financial decision whether it’s business or personal, it’s important to always do your homework. Some things to check before applying for asset finance include:
- Your business status (does it have a valid Australian Business Number (ABN)?
- Whether your business is registered for GST
- What you intend to use the asset/s for – i.e. is it mainly for business use?
- What products and offers available to your business
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Once you’ve worked out what you need and what asset finance product is right for your business, it’s time to talk to the experts. At Metro, we use brokers to support our customers. A Metro broker can explain the range of products we have available and take you through every step of the application process.
To find out more or talk to one of our award-winning brokers, click here.
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Once you’ve received an asset finance offer from Metro or another financier, it’s time to sign the loan or lease agreement based on the terms and price you’ve discussed with your broker. Once completed and a final invoice for the purchase of the asset is provided to the financier, it’s time to collect your asset and put it to work!
Types of Asset Finance Available
As we’ve mentioned, there are a number of different assent finance options available to businesses, each with their own benefits and payment structures. At Metro, the two main asset finance products we offer are commercial finance agreements, and finance leasing.
Some features that differ between loans and leases typically comes down to who has ownership over the asset. In the case of a loan, it is usually the business that retains ownership after all repayments and all final balloon payments have been made; whereas with a lease the asset is owned by the financier.
Commercial Finance Agreements Product Features:
- Loan value available from $10,000 to $1M
- Loan terms ranging from 2 to 5 years
- No annual or account keeping fees
- Competitive fixed interest rates
Choose this tertiary equipment finance product if you are looking for a straightforward and cost-effective financing solution.
Finance Lease Product Features:
- Loan terms ranging from 2 to 5 years for business purposes only
- Loans from $10,000 to 1M
- No annual or account keeping fees
- Repayments by monthly direct debit
- Potential tax benefits
Choose this tertiary asset finance product if you need to keep your equipment up to date whilst potentially freeing up capital.
Who is Asset Finance Suitable For?
Asset finance is designed for businesses of all shapes and sizes and is really only limited to the type of assets they require. Because the asset itself is often used to secure the loan, meaning that no other form of security is required to obtain funding, it can be a great solution for both small businesses and larger enterprises.
Sectors that require vehicles, equipment and the latest tools-of-trade, such as construction, transport, agriculture and healthcare industries, regularly use asset finance products to keep their businesses running.
Commercial Asset Finance vs. Personal Asset Finance
As the names suggest, the biggest differences between commercial asset finance vs personal asset finance is that one is for businesses, while the other is for individuals.
Personal asset finance is primarily offered to individuals for vehicles and, in the case of Metro Finance’s MetroEco product, also extends to vehicle chargers and solar technology, whereas commercial asset finance extends to machinery and high-value industry equipment.
In both instances the asset itself may be used as security against the loan or lease, offering higher borrowing power.
How to Choose the Right Asset Finance Provider
As we’ve discussed, there are lots of options out there when it comes to asset finance. It’s important to understand your own business requirements for an asset first and then look at what products and offers may be available to you.
With any financial decision, it’s always important to get expert advice and understand the terms and any inclusions for a financial product you may take on.
Get Started with Asset Finance Today
Got a question or need help acquiring an important business asset? A Metro broker can help guide you through the asset finance application process and help get you and your business the asset/s it needs.
With a range of tailored products to choose from with great rates and flexible terms, one of our friendly brokers will help you find a solution that’s right for you.
