Asset Finance refers to a range of financial products designed to help businesses acquire assets, such as vehicles, machinery, equipment, and technology, without needing to pay the full purchase price upfront. It allows businesses to spread the cost of these assets over time, thereby preserving cash flow and enabling growth.
Key Types of Asset Finance in Australia
Rental / Operating Lease: An option that works well for all types of equipment. Rental & Operating Lease’s give your business flexibility. You can Upgrade, Purchase or Return the Equipment at any time during the agreement to ensure you have the right tools and equipment key to your Business’s success.
Rental gives you the ability to acquire equipment when it’s needed, whether it’s to keep up with growing demand or improve your productivity.
Rental &Operating Lease’s carry the added benefit of being 100% tax deductible* Rental may qualify for off balance sheet accounting, ask your accountant or tax adviser how Rental can work for you.
At Finance@work we understand that your circumstances may change. We provide a flexible range of End of Term Options including:
- Purchase the equipment
- Upgrade the Equipment to the Latest Technology available
- Return the Equipment
- Continue to rent month to month
- Extend the Rental for further fixed term at a discounted payment
Managed Services: Finance product that combines the finance, service and consumables into one payment. This facilities gives business the security of not only funding the equipment but also including the maintenance ensuring that the equipment is at it’s most productive with greater uptimes.
These facilities are generally 100% tax deductible provided the equipment is used for business use and come with flexible options at the end of the agreement.
Finance Lease: A finance lease is an agreement where the finance company will purchase the goods on your behalf, giving you a low fixed monthly Instalment over a fixed period with a residual value at the end of term.
When choosing a residual value, it must adhere to ATO guidelines. The higher the value of the residual, the lower monthly Instalments.
The benefits of a Finance Lease include:
- Payments are 100% tax deductible if the equipment is used for business purposes.
- You have the flexibility to easily upgrade the equipment when required to ensure that your business has the right tools required for success.
- At the End of Term you make an offer to purchase the goods from the Financier at the Residual Value.
Chattel Mortgage: A Chattel Mortgage works much in the same way a commercial loan does – you pay back the loan in installments on a monthly basis. You can lower your monthly repayments with a residual value or “Balloon” payment.
Benefits of a Chattel Mortgage
- Provided the equipment is used 100% for business purposes, you are able to claim the interest paid on the facility and depreciation on the equipment as a tax- deduction
- If the Business is registered for GST, you may be eligible to claim some or all of the GST upfront, rather than over the term of the loan.
- Deposits are optional but not generally required, and you can buy the equipment at any time during the agreement. You may also choose a balloon payment at the end of the term to decrease your monthly commitments.
Equipment Finance: Specifically designed for purchasing equipment, this type of finance can be structured as any of the above options (lease, hire purchase, chattel mortgage) depending on the business’s needs.
Benefits of Asset Finance
Preserve Your Cash Flow: Put your cash into your business where it can be better used rather than purchasing depreciating equipment. Don’t wait years for your equipment to generate you income, ensure your business has the right tools to deliver the highest levels of productivity. Let finance work for you today.
Get The Equipment You Need Today: By using finance you can acquire the equipment that your business needs, particularly where there is a limit on capital expenditure. Get the equipment that’s right for your business and pay for it over its lifespan.
Flexibility: The finance agreement can be structured to your needs. You may choose to finance over various terms. For example, align the term of your office lease with your finance agreements. Payments may also be structured, monthly, quarterly or annually to suit your requirements.
Tax Advantages & Budgeting: Under a Rental or Operating Lease, monthly payments are 100% tax deductible (provided it is used for 100% business use). Under a Chattel Mortgage you may claim the interest payments and depreciation on the equipment as a deduction. Payments are fixed throughout the term of the agreement making it easy to budget your expenses.
Considerations
Interest Rates and Fees: Businesses should compare rates and fees across different providers to ensure they get the best deal.
Asset Depreciation: The depreciation rate of the asset should be considered when selecting a finance option, as it affects the residual value and total cost.
Regulatory Compliance: Businesses must ensure that the finance agreements comply with Australian financial regulations and that they fully understand the terms and conditions.
Asset finance is a vital tool for Australian businesses looking to grow and expand without depleting their cash reserves. By carefully selecting the right type of asset finance, businesses can manage their cash flow more effectively, take advantage of tax benefits, and maintain financial flexibility.
* The above should only be used as a guide, please contact your Accountant or Financial Adviser for more information.