For businesses across Australia, staying competitive often requires regular upgrades to equipment, vehicles, and technology. However, acquiring these assets outright can be a significant financial strain, especially for small to medium-sized enterprises (SMEs). Asset finance offers a simple, flexible, and cost-effective way to access the tools your business needs to grow without disrupting your cash flow.
In this guide, we’ll demystify asset finance, explore its benefits, and provide actionable insights into how it can help you upgrade your business without breaking the bank.
Asset finance is a type of funding that allows businesses to acquire essential assets—such as machinery, vehicles, or IT equipment—without the need for large upfront payments. Instead of purchasing the asset outright, businesses can spread the cost over time through regular payments, making the process more manageable and predictable.
Asset finance comes in several forms:
• Leasing: You pay to use the asset over an agreed period, often with the option to purchase it at the end of the lease term.
• Hire Purchase: You make regular payments and gain ownership of the asset once the final installment is made.
• Chattel Mortgage: You own the asset from the start but use a loan secured against the asset to fund the purchase.
Each option is designed to suit different business needs and circumstances.
One of the biggest advantages of asset finance is the ability to preserve your working capital. Instead of making a large upfront payment, you can spread the cost over time, keeping your cash flow healthy and available for other operational needs.
Up-to-date equipment and technology are crucial for maintaining efficiency and competitiveness. Asset finance enables you to access the latest tools and stay ahead of industry trends without needing to wait until you can afford an outright purchase.
Asset finance agreements are highly customizable. You can choose repayment terms, interest rates, and asset ownership options that align with your business goals.
Depending on your specific arrangement, asset finance can offer tax advantages. For example, lease payments are often tax-deductible as operating expenses.
Fixed repayment schedules make it easier to plan your finances, ensuring predictable expenses that align with your cash flow.
Asset finance is suitable for businesses in a variety of industries, including:
• Construction: Acquire heavy machinery, cranes, or excavators without a large capital outlay.
• Transport and Logistics: Fund the purchase of commercial vehicles or fleet upgrades.
• Retail: Upgrade point-of-sale systems, shop fittings, or refrigeration units.
• Manufacturing: Access the latest production machinery to boost efficiency and output.
• Healthcare: Invest in medical equipment or diagnostic tools to improve patient care.
Whether you’re a start-up or an established business, asset finance can be tailored to meet your unique needs.
With a lease, you rent the asset for a specified period. At the end of the term, you can choose to return the asset, renew the lease, or purchase the asset at a reduced cost. Leasing is ideal for assets that quickly depreciate or become outdated, such as technology or vehicles.
Example Use Case: A retail business leases a new point-of-sale system. The monthly lease payments are manageable, and the business can upgrade to the latest system at the end of the lease.
Under a hire purchase agreement, you make regular payments for the asset and gain ownership once the final payment is made. This is a good option for businesses that want to own the asset in the long term.
Example Use Case: A logistics company uses hire purchase to fund new delivery vehicles. Once the payment term is complete, the vehicles become company assets.
With a chattel mortgage, the lender provides a loan to purchase the asset, which serves as security for the loan. The business owns the asset from the outset. This option is popular for businesses looking for ownership flexibility.
Example Use Case: A construction firm uses a chattel mortgage to buy an excavator. The firm owns the equipment from day one, while the loan repayment is spread over time.
Determine what assets your business requires and whether ownership or usage is more important. For rapidly evolving equipment like technology, leasing might be ideal. For long-term assets, consider hire purchase or a chattel mortgage.
Understand your cash flow and repayment capacity. Asset finance solutions are designed to align with your financial situation, ensuring manageable repayments.
Consult your accountant to understand how different asset finance options may affect your tax obligations. Some options, like leasing, may offer significant tax advantages.
Work with a reputable finance provider like DeMarque Finance, which specialises in tailored solutions to meet your business goals.
Background: A Sydney-based landscaping company was struggling to meet client demand due to outdated equipment. Purchasing new machinery outright wasn’t an option due to limited cash reserves.
Solution: The company partnered with DeMarque Finance to secure a hire purchase agreement for modern landscaping tools and a commercial vehicle.
Outcome: With access to the latest equipment, the business improved operational efficiency and expanded its client base, resulting in a 25% increase in revenue within six months.
Focus on assets that will have the most significant impact on your business’s efficiency, productivity, or profitability.
Consider how quickly the asset will lose value and whether it makes sense to own or lease it.
Review the terms of your finance agreement carefully, including interest rates, repayment schedules, and end-of-term options.
Work with financial experts to ensure your asset finance aligns with your broader business strategy.
At DeMarque Finance, we specialise in helping Australian businesses access the tools they need to thrive. Whether you’re upgrading your fleet, investing in new technology, or acquiring heavy machinery, we offer tailored asset finance solutions to meet your unique needs.
• Competitive rates and flexible terms
• Expertise in asset finance across diverse industries
• A commitment to supporting SMEs with personalised service
Investing in your business doesn’t have to be a financial burden. With asset finance, you can access the equipment and tools you need while preserving your cash flow and maintaining financial stability.
Whether you’re looking to lease, hire purchase, or secure a chattel mortgage, DeMarque Finance is here to help. Let us guide you through the process and find the best solution for your business.
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. © DEMARQUE GROUP PTY LTD 2024. All rights reserved.
