The start of a new financial year is a perfect time to set goals for growth.
If you are looking to expand your business in FY25, having clear goals can help you choose the right loan product to get you there.
Asset finance
You need to spend money to make money.
Asset finance can be an efficient way to grow your business if you can’t, or don’t want to, buy equipment upfront.
In some circumstances, equipment purchased may be used as security for the loan and repayments can be structured to suit cash flows and forecast growth.
The most common types of Asset Finance:
1. Chattel mortgage
A chattel mortgage is a commercial loan using the goods as security.
Repayments can be structured over a range of terms — usually 1 to 7 years.
Interest rates are usually lower than unsecured loans and are generally fixed.
Repayments can be fixed at the same amount each month or can be structured to fit your seasonal cash flow requirements.
You own the financed asset up-front, so it appears as an asset on your balance sheet as well as the finance showing as a liability.
A balloon payment can be set at the end of the term to lower your monthly payments.
2. Capital Raise
A Capital Raise allows businesses to unlock cash from assets already owned or partially owned.
Generally funded via a Chattel Mortgage product.
Utilise equity in assets to assist with cashflow or business working capital requirements.
Equipment is used solely as security.
Benefits
Asset finance gives you a lot more benefits than simply preserving the all-important cash flow and working capital.
It can generate immediate income, the repayments let you budget more accurately, and you can reduce your maintenance costs with new equipment.
Plus, you may have the opportunity to access the government tax incentive for the purchase of assets.
