Asset Finance :: What Is It And Does Your Business Need It?

by Paul Goldsmith of Highlands Funding


Highlands Funding Paul Goldsmith Financial Consultant


Asset finance is a hugely popular form of finance used to fund a wide variety of business assets and equipment.

Asset finance allows a business to get the equipment they need now, and pay for it over its useful working life, reducing annual CAPEX. While commonly used by individuals for vehicles, businesses can use asset finance to fund a large variety of equipment including machinery, yellow goods, manufacturing equipment and fit-outs. In many instances a business can also fund second hand goods. 


So, where do you start? 

As a starting point, business owners need to determine what their financial objectives are, as different loan types serve different purposes. There’s a lot of confusion and cross-over amongst the many terms used to describe asset finance, and hopefully this article will help clear things up. 

A key consideration is who owns the goods and what the tax implications are. This article is a good starting point but then speak to your accountant or tax advisor can help determine what’s best for your business. 

One thing that remains true across all asset finance types is there is a level of flexibility around the loan term, so you can choose a term and balloon to best suit your cashflow and business needs. Terms vary from 3 to 10+ years, depending on the asset type and things such as its useful working life, depreciation and resale market quality.

Give us a shout at Highlands Funding if you need some help with asset finance and what it means for your business. 

Okay! Here are some different types of Asset Finance you'll come across. 


Equipment Loan (AKA Chattel Mortgage)

The borrower (your business) owns the goods, and repays the lender over the loan term. The lender takes a charge (security) over the goods and registers the charge on the Personal Property Security Register (PPSR).

  • The business maintains ownership of the goods from purchase date
  • Interest and depreciation are generally tax deductible
  • No deposit generally required, flexible loan term, balloon payments


Finance Lease

The lender buys and retains ownership of the goods and leases them back to the borrower for the contract period.

  • The business doesn’t own the asset so it doesn’t sit on their balance sheet. 
  • The business is generally responsible for ongoing costs 
  • The business may have the opportunity to buy the goods at end of term (making it similar to hire purchase below)
  • Lease payments are tax deductible (opposed to just the interest under an equipment loan)
  • The business doesn’t need to make large or long term capital investments
  • The business generally bears risk of disposal


Hire purchase

The business leases the goods from the lender, with agreement that ownership is transferred to the business on receipt of the final payment. 

  • The business is generally responsible for ongoing costs 
  • Lease amount can be claimed as a tax deduction
  • The business still owns the goods at the end of the term

Operating lease

Similar to a finance lease, a business pays to ‘operate’ the goods for a portion of its useful working life under what is essentially a long term rental agreement.

  • A construction company may wish to use a crane for 2 years of its 10 year useful working life, entering into an operating lease for the 2 years
  • The lender is generally responsible for ongoing costs
  • The business only pay for the goods for the period they wish to use it
  • Lease payments are tax deductible (opposed to just the interest under an equipment loan)
  • The business doesn’t need to make large or long term capital investments
  • The business does not bear the burden of disposal at end of lease


Novated lease

Similar to a finance lease in that the borrower doesn’t own the goods, though generally organised through the borrowers employer. The lease is in the name of the individual who also bears the risk, though repayments are made by the employer as a salary sacrifice pre-tax

  • The lender is generally responsible for all ongoing costs such as fuel and servicing
  • Reduces personal taxable income and thereby tax payable
  • Generally ‘full service’ vehicles with all on-road and ongoing costs included


There's quite a bit of info in there, we know. So if you're keen to alook into Asset Finance for your business but unsure about next steps, give us a call at Highlands Funding on 1300 207 881.    


Based in the Southern Highlands, Highlands Funding provides clients with suitable and cost-effective financial solutions to suit all sorts of lifestyle requirements. If you're a property investor, home buyer or own your own business, Paul and the Highlands Funding team will take the time to understand your situation, arrange and manage your business and home finance and optimise your financial situation. Paul is super experienced in the world of regional banking, agribusiness, small business and personal finances. Find out more info about Highlands Funding here


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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.


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