As a small to medium business owner, it’s essential to make strategic decisions when it comes to managing your finances, especially when investing in new assets. Whether it’s upgrading equipment, purchasing vehicles, or acquiring machinery, there are multiple ways to finance these essential assets. One of the most effective options available is financing your business assets instead of buying them outright. But why should you consider this approach? In this article, we’ll explore the benefits of asset finance and why it could be a game-changer for your business’s cash flow and long-term success.

Table of Contents

• Introduction: Why Financing Is a Smart Move 
• Understanding Asset Finance 
• Benefits of Financing Your Assets
  
• Common Types of Asset Financing 
• Things to Consider When Financing Assets 
• Conclusion: Unlock Financial Freedom with Asset Financing 

Introduction: Why Financing Is a Smart Move

When you purchase business assets outright, you’re likely committing a significant amount of your capital upfront. While this might seem like a good option in some cases, it can deplete your cash reserves and restrict your ability to take on other important business initiatives. Financing your assets can offer a far more advantageous solution.

Asset finance provides you with the ability to spread out the cost of essential business equipment and vehicles over time. This means you can keep your cash flow intact while still acquiring the tools needed to grow your business. Whether you’re considering a business vehicle, new machinery, or IT equipment, financing allows you to manage these purchases with greater flexibility and lower financial strain.

Understanding Asset Finance

Asset finance is a type of lending designed to help business owners acquire the equipment, vehicles, or machinery they need to run their business. It works by spreading the cost of the asset over an agreed-upon term, typically through fixed monthly payments. This means that instead of making a large upfront payment, your business can enjoy the benefits of the asset while paying for it over time.

Some of the most common types of asset finance include:

• Chattel Mortgages: A loan where the asset is owned by the business and the lender holds a security interest in the asset. 
• Finance Leases: A lease agreement where the business can use the asset for a set period and has the option to buy at the end of the term. 
• Operating Leases: Similar to a finance lease but without the option to buy, ideal for short-term use of assets. 

Benefits of Financing Your Assets

There are several reasons why financing your business assets instead of buying outright can be a smart move for your business. Let’s dive into the key benefits:

3.1 Preserve Cash Flow

Maintaining healthy cash flow is critical to the day-to-day operations of your business. By financing your assets, you can avoid depleting your cash reserves on large upfront payments. Instead, you pay in smaller, manageable monthly instalments, which allows you to maintain liquidity for other important business expenses, such as payroll, stock purchases, or unexpected costs.

3.2 Tax Benefits

Financing assets can also provide tax advantages. In Australia, businesses may be eligible to claim depreciation on the asset or receive tax deductions on interest paid for loans, depending on the type of asset finance used. For instance, if you choose a chattel mortgage, you may be able to claim the GST back on your purchase. The ability to offset these costs can have a positive impact on your business’s tax position and reduce the financial burden of the asset acquisition.

3.3 Flexibility and Control

Asset finance offers a level of flexibility that purchasing outright simply cannot match. You have the option to upgrade or replace your assets during the financing term, ensuring your business stays competitive and equipped with the latest technology. Additionally, financing allows you to tailor repayment terms to suit your business’s financial situation, ensuring the payments are in line with your cash flow.

Common Types of Asset Financing

When deciding how to finance your business assets, it’s essential to understand the different types of financing options available to you. Here are some of the most common options:

1. Chattel Mortgages: This type of financing allows your business to own the asset outright from day one, but the lender holds a security interest in the asset. This is ideal for businesses that want to take ownership of the asset at the end of the financing term. 
2. Finance Leases: A finance lease is similar to renting, but with the option to buy the asset at the end of the lease term. This is great for businesses that want to use equipment or vehicles for an extended period without committing to full ownership. 
3. Operating Leases: For businesses that need to use an asset for a shorter period, operating leases provide the flexibility to return the asset once the lease term is complete. This option is particularly useful for businesses that need equipment for specific projects or that prefer to regularly upgrade their assets. 

Things to Consider When Financing Assets

While asset finance can offer many benefits, it’s important to keep a few key considerations in mind:

• Interest Rates and Fees: Make sure you’re aware of the interest rates, fees, and any additional costs associated with the finance agreement. Compare options from different lenders to ensure you get the best deal. 
• Asset Usage: Understand how you intend to use the asset and how long you will need it. This will help you decide which type of finance option is best suited to your needs. 
• Repayment Terms: Consider the length of the finance term and how it aligns with your business’s cash flow. Make sure that the monthly repayments are manageable within your business’s financial capacity. 

Conclusion: Unlock Financial Freedom with Asset Financing

Financing your business assets is an excellent way to preserve cash flow, take advantage of tax benefits, and provide your business with the tools it needs to grow. With a range of asset financing options available, you can find the best solution for your unique needs. At Capital Plus Finance, we work with over 40 lenders to help Australian businesses access the right finance solutions tailored to their goals. If you’re ready to learn more about how asset finance can benefit your business, get in touch with us today.

For more information, visit Capital Plus Finance and speak to one of our equipment finance specialists.