A business is nothing without the tools of the trade, and the equipment you need to maintain operational continuity. If you are a printer, you need a few high-end printing machines. Businesses that require delivery of goods require trucks, and construction companies need heavy-duty equipment and vehicles like earthmovers, forklifts, etc. While these might be essential business assets, acquiring them is not easy, especially for an SME or a new business. That’s where asset finance comes to your rescue.
What is an asset? To understand asset finance, you first need to define an asset. Equipment or item which depreciates over time, such as a vehicle, equipment, plant and machinery, etc., can be an asset. These hold value for the business. Owning an asset allows you to peg it as collateral for future loan applications.
Asset finance helps enterprises secure the necessary funding to buy tools of the trade, minus the massive down payment. You can also use asset finance to lease equipment for your business. Depending on the kind of work that you do, it can be anything from a vehicle to heavy machinery. Often a business secures funding by outing underlying assets of the company as security.
The popular types of asset finance are:
Equipment finance is a form of a commercial lease or business financing that enables business owners to secure funding, enabling them to replace old equipment or buy new equipment for business purposes. It allows you to borrow the entire value of the equipment against a 7-year (maximum) loan term and fixed interest rate. The equipment has to be strictly used for business purposes. The type of equipment varies based on the business type and its requirements. Some lenders offer you low doc approvals up to $250,000.
Business vehicle finance is the funding you acquire to buy or lease a vehicle to use the same for business purposes. The type of vehicle can range from a two-wheeler to a delivery truck. One has to ensure that the vehicle is used for business purposes for more than 50% of the time. It is a fixed-term business financing contract, which has a fixed interest rate. There is no need for security as the vehicle acts as collateral against the funding. Once you buy the vehicle, you can claim ownership rights for tax rebates and benefits.
If your business is involved in the heavy lifting of goods and transporting them from one place to another in a warehouse or shipping dock, then you need a forklift. Small business owners often apply for forklift finance to lease or buy the equipment, given the significant cost. It works in similar ways as business vehicle finance. You can secure funding up to 100% of the equipment value against a loan term of 3 to 7 years.
When seeking asset finance from a lender it is easier to reach out to a finance broker than to visit the lenders individually with a loan appeal. Finance brokers like Broc Finance have an established network of credible lenders. When you hire them, the broker will represent you and present your case to the lenders to find an appropriate loan product for you. It saves you time and hassle. So, connect with the experts today!
Saroj is the Head of Lending at Broc Finance. He comes with 13+ years of experience in small business lending and has a knack of structuring complex deals and get the best outcome for his customers.
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