Asset Finance: A Flexible Way to Purchase What Your Business Needs

8 April 2016

About asset finance

Whether you’ve been in business for some time or you’re just starting out, you’ll know how critical it is to have the right tools for the job, regardless of what it is you do. The appropriate vehicle, plant and equipment for your business are assets that require careful consideration, ensuring they align with your overall goals and objectives. It’s also important to consider your financial strategy when it comes to your assets, understanding that each type of funding can have varied benefits and implications for your business when it comes to overheads, cash flow, tax and the potential for growth.

What is asset finance?

Asset finance or equipment finance is a method for purchasing specific assets for your business. The process is similar to a personal loan being secured by an asset - a piece of equipment or a vehicle. This type of finance can be structured in a variety of ways depending on what you’re looking to purchase and your business objectives.

What are the different types of asset finance?

There are four main types of asset finance:

  1. Equipment loan
    An equipment loan is where you own an asset from the outset, with your loan agreement secured to that asset. The financier holds a charge over the asset until the loan is fully repaid. This is sometimes referred to as a chattel mortgage.

  2. Hire purchase
    Hire purchase finance allows you to acquire the equipment that you need by hiring it over a fixed term, with payments tailored to meet your business needs. You own the equipment when the final payment is made.

  3. Finance lease
    A finance lease enables you to lease equipment with no upfront deposit required with flexible terms in place to suit your cash flow requirements. The financier will own the equipment during the lease agreement.

  4. Novated lease
    A novated lease is an arrangement between an employer, you (their employee), and your financier. Essentially, you lease a motor vehicle of your choice and your employer makes the repayments, rentals and other running costs directly from your gross salary.

What are the benefits for my business?

Asset finance can be quick to process and offers a range of features that may be beneficial to your business.


You can structure your asset finance agreement to set the term and the repayments that work best for your business. This means you can free up cash flow, manage repayments more easily and also have the ability to finance up to 100% of the full purchase price including the GST. 1

Take pressure off your business savings

Rather than paying the full purchase cost upfront, you can make regular repayments for use of the asset over an agreed period of time.

Reduction of regular payment amounts

Balloon or residual repayments involve structuring your payments so that you have a single large payment at the end – reducing your regular ongoing payments. This payment style can be particularly beneficial if you are purchasing a vehicle using asset finance.

Potential savings with lower rates

Asset finance interest rates can often be significantly lower when compared with other finance types.

Free up the equity in your other assets

With asset finance, the loan is secured against exactly what you are buying, which means it has standalone security. This frees up other valuable business capital (such as property) to leverage for other business lending requirements.

Maximise tax deductions

Under accounting rules, short life depreciating assets (such as vehicles) lose value at a relatively high rate. In many cases you are able to claim the depreciation in the asset, as well as the interest paid, which may have a tax benefit. 2

What else is there to consider?

High risk assets

The financier will assess the type and age of the asset, as well as its cost and condition. If the asset is considered to be high risk:

  • The interest rate on the agreement may be increased
  • The term limited to a lower number of years
  • An upfront deposit may be required.

Depreciation rate

In some instances, you could get offered a lower interest rate if you go with a large balloon payment at the end of your loan period. If this is an option you’d like to consider, it’s important to have a good understanding of how much your asset is likely to depreciate over the term of the loan. If your asset value drops below the value of your final balloon payment, you will need to cover the gap.

Compare apples with apples

It’s important to note that asset finance rates can change daily. When researching your options and comparing the types of finance available, pay close attention to additional costs that may be involved including application and monthly fees, as well as interest rates.

How can we help?

Business Specialists Team

Speak with someone from the team today

Business Banking Specialists

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1. 100% finance will only be provided subject to our assessment and approval.

2. This is not tax advice. When considering finance solutions for your business, we recommend that you seek independent advice from your Accountant and/or Financial Advisor.

Full terms and conditions, including any fees and charges, are available on application. Applications for finance are subject to lending criteria.

We recommend that you seek independent advice on taxation issues from your taxation advisor or accountant. The Commonwealth Bank is the Issuer of the finance products referred to and it reserves the right to require finance arrangements to be made with a subsidiary company of the Commonwealth Bank Group. Employers and employees are encouraged to seek professional advice on all aspects of novated leasing before proceeding.

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.