6 Asset Finance Options: Which is Right for Your Business?

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Asset financing can help your business in a variety of ways. It can help you to acquire capital needed to grow your business, smooth out the problems with your cash flow, upgrade necessary equipment and improve your tax outcomes. Perhaps you need new vehicles for your company fleet, a shop fit-out for your storefront or maybe even heavy machinery so you can take on big projects.

Whatever the reason, asset financing can help your business to get the capital it needs. But it’s important to choose carefully among your many asset finance options. As you consider your needs, make sure to pay attention to the following six asset finance options.

 

1. Commercial Hire Purchases

With commercial hire purchases, you hire an asset and then continue to make payments until the asset is paid off. As soon as you have finished paying the final instalment, the asset’s title is transferred to your company’s name. This is a great option if you want to own the asset long-term.

There is some flexibility with this option that can help you to tailor your financing to your current cash flow situation. For example, you may be able to change the loan period, use a balloon payment or request a larger or smaller deposit up front. You may also be able to arrange for a larger final balloon payment.

 

2. Finance Leases

Finance leases are helpful to businesses that require the latest vehicles or equipment but don’t want to tie up the bulk of their capital in these items. With these types of asset financing, the lender owns the asset, but you (the borrower) bear the risk of disposal once the lease is up. 

Like commercial hire purchases, there is some flexibility regarding lease payments and terms. The Australian Taxation Office (ATO) requires a residual value in line with the asset’s use.

 

3. Chattel Mortgages

With chattel mortgages, you own the asset from the very start, and that’s one of the reasons this option is so popular. Your loan is secured by the asset itself, and you can tailor your loan arrangements by choosing the term. In most cases, the term is five years or less. You can also customise your chattel mortgage by varying other terms, such as paying a higher deposit or a higher final instalment.

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4. Novated Leases

The best asset finance option if you want to include a vehicle with your salary package is a novated lease. With this financing option, both employee and employer sign a novation agreement, meaning you’re both responsible for the loan.

Employees should work with their HR departments if they want to use a Novated Lease. Loan terms for this financing option generally range from 12 months to 5 years.

 

5. Fleet Operating Leases

With a fleet operating lease, your company never owns the vehicle. The financier owns it for the duration of the term (usually between 12 months and 5 years), and you simply return the vehicle at the end of the term.

Fleet operating leases are usually helpful for small businesses. Fees for registration, insurance, tyres and even scheduled maintenance can all be rolled into the lease, simplifying your cash flow and freeing up precious resources.

 

6. Technology Rentals

Vehicle fleets aren’t the only assets that companies need to finance; technology rentals can also make a big dent in your company’s finances if you’re not careful. Many smaller companies find that it’s difficult or impossible to pay for the latest equipment up front. That’s why renting is appealing and financially sound in many cases.

Technology rentals work in much the same way as fleet operating leases. You never own the equipment outright, and you return it at the end of the rental term. In many cases, the term is three years. One of the most attractive features of technology rentals is that you never have to own obsolete technology. You simply turn it in at the end of the lease term and then rent the latest-and-greatest.

As you can see, there are many asset finance options that can help your business to acquire the capital, vehicles and technology you need. For more information about these finance options and how they can affect your cash flow and taxes, reach out to us at Altus Financial. Our business experts can help you to develop a plan that will help you to reach your goals.

 

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Julie Azzi

Julie is a Loan Specialist at Altus Financial and she works with clients to help them seek the right loan and loan structure that suits their needs. Let's Connect