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Why get asset finance through Money.com.au
Save time
By comparing multiple asset finance providers at once
Get personalised rates
Ones you’re actually eligible for
No credit score impact
Even when comparing lots of options
Get expert support
Our asset finance specialists (real people) are on hand to help
What is asset finance?
Asset finance is an umbrella term for business loans or lease products used to finance various business assets. This can include company vehicles, fleets, and all sorts of business equipment, plant, machinery and even office fit-outs.
The length of the asset loan or lease will vary based on the type of asset you’re financing and the product's lifespan. Asset finance can be used to buy new assets or replace and upgrade existing ones.
How does it work?
Asset finance allows sole traders and business customers to buy assets for their company, including vehicles or equipment, while spreading out the cost over time to help manage cash flow.
The asset you finance becomes collateral for the loan, effectively reducing your interest rate because the lender can repossess the asset if you default. An asset loan is the direct opposite of an unsecured business loan, which is not backed by an asset.
Asset finance features
- Borrow anywhere from $10,000 to $1,000,000+
- Finance terms from 1-7 years
- Asset loan and lease options available
- Finance can be set up with or without a balloon payment option
- You may be able to claim GST credits & other tax deductions on the asset you buy
According to Money.com.au's analysis of thousands of asset finance requests, the average amount borrowed is $87,754 across vehicles, machinery and equipment. For loans to purchase another business the average is much higher $617,581.
What are the interest rates on asset finance?
Asset finance interest rates are fixed from 7.50-15% p.a., depending on the strength of your application and your business risk profile. The credit scores and overall credit history of both your business and its directors are a major factor here.
Your interest rate will also depend on the type of asset you’re financing, with heavy vehicles or machinery generally fetching higher rates.
What assets can you finance?
Light vehicles
Sedans SUVs Work vans Work utes Motorcycles
Heavy vehicles
Trucks Buses Specialised vehicles Trailers Yellow goods Farming & agriculture equipment
Business machinery or equipment
Construction equipment Warehousing equipment Manufacturing equipment Medical or dental equipment Landscaping equipment Office & IT equipment Solar panels & inverters
Specialised equipment
Commercial kitchen equipment (including appliances) Furniture & fit-outs Security systems ATMs Vending machines
Almost 4 in 5 asset finance requests (77.5%) through Money.com.au in 2024 were for a vehicle purchase, with the remainder being used for other types of business machinery and equipment.
Who’s eligible for asset finance?
Eligibility requirements for asset finance will vary between lenders, but generally include:
- Australian citizenship or permanent residency
- An active ABN or ACN
- At least six to 12 months of trading history
- Your business must be GST-registered
- You must be able to provide bank statements and other proof of eligibility
- A good credit score — the minimum credit score for business lending is around 475 (it could be less if you’re a homeowner)
- You must be purchasing or leasing an asset used at least 51% of the time for business
Who is asset finance suitable for?
Asset finance is typically suitable for:
- Sole traders and businesses who want to spread out the acquisition cost of assets or equipment over multiple months or years to retain working capital
- Businesses with limited cash flow who need to buy assets for everyday use or to scale their operations
- Businesses that need to lease assets or equipment over a limited period of time (e.g. construction companies often lease excavators and bulldozers for specific projects)
- Businesses in industries that require up-to-date technology or who need to update the asset(s) during the lease term (e.g. healthcare, airlines).
Our data shows the majority of asset finance borrowers (53.4%) are sole traders. It's generally more common for established businesses to apply, with most borrowers having 3+ years trading history. The building and construction industry is the heaviest user of asset finance.
Compare asset finance options
Asset loan
With an asset loan (also known as a chattel mortgage), you borrow money from the lender to purchase a business asset, such as a vehicle or equipment. The asset serves as collateral for the loan, which you repay with interest in regular instalments over a fixed term, similar to a mortgage.
Your business has full ownership of the asset from the outset and is responsible for all maintenance and registration costs. However, if you default on the loan, the lender can repossess the asset. The asset will be registered on the Personal Property Securities Register (PPSR) until you repay the loan. This lets other lenders know there’s a security interest on the asset.
Once you've fully paid off the asset loan, you’ll have unconditional ownership of the vehicle and the asset will be removed from the PPSR. If there’s a balloon payment at the end of the finance term, you’ll have a couple of options:
- Pay the residual balloon and decide whether to keep or sell the asset.
- Refinance the balloon amount into a new loan and pay it off in regular instalments (with interest).
- Trade your asset for another one with a new finance agreement, settling the balloon amount as part of the trade-in process.
An asset loan is a popular option for small businesses with vehicle fleets and for manufacturing industries, construction companies, tradespeople and transport companies. ‘Vehicles or transport’ is by far the most common reason businesses request finance through Money.com.au (41.50% of all requests).
Asset loan tax benefits
According to the ATO, the interest on an asset loan is tax deductible as a business expense, plus depreciation (up to the ATO’s depreciation limit).
If your business is registered for GST, you may also be able to claim a credit for the GST paid on the initial asset purchase. This can be claimed as what’s called an input tax credit on your BAS for the relevant period. You can only claim a credit for the business use of the asset.
Asset finance lease
Under a finance lease, the lender buys the asset on your behalf and leases it to you in exchange for regular payments, plus interest, over a fixed period. You’ll get the benefits and responsibilities of ownership (including upkeep costs), but the lender retains actual ownership of the asset during the lease term. Some leasing agreements include maintenance and servicing costs as part of the contract.
Depending on your agreement, you’ll have a few options at the end of a finance lease term:
- Pay the pre-agreed residual amount and return the asset at the end of the lease term.
- Buy the asset from the lender by making a final residual payment. If the asset's value exceeds the residual amount, your business can profit from the purchase by selling the asset. But, your business could also incur a loss if you sell the asset for less than the residual amount.
- Refinance the residual amount into a new lease agreement.
- Trade in your current asset to purchase another under a new finance agreement. You could use the proceeds from the trade-in to pay the balloon payment.
A finance lease is generally suitable for high-value assets or assets with a longer lifespan, like company vehicles, heavy machinery and specialised equipment. It provides more owner benefits (i.e. unrestricted use of the asset with the option to buy it at the end of the lease term) for a borrower than an operating lease.
Tax advantages of finance leases
Finance lease payments and the GST included in the lease charges over the lease term may be tax deductible, according to the ATO.
To claim GST credits on lease charges, you treat each payment on your BAS as a separate purchase for each tax period, even though each payment is for the same goods under the same lease agreement, according to the ATO.
If you purchase the asset at the end of the lease term, you may also be eligible to claim the GST you paid on the purchase.
You may have to record your finance lease on your business balance sheet as a lease liability.
Finance lease payments and the GST included in the lease charges over the lease term may be tax deductible, according to the ATO.
Operating lease
An operating lease also allows your business to lease an asset in exchange for regular fixed repayments (or based on usage), including servicing and maintenance costs. You can commonly upgrade the asset or equipment within the lease period, but there’s no option to own the asset at the end of the contract.
Depending on your agreement, you’ll have a two options at the end of an operating lease term:
- Return the asset to the lessor at the end of the lease term (the asset is then usually sold to a third party on behalf of the lessor).
- Renew the lease under new terms.
Operating leases are shorter-term agreements commonly used for assets that need to be upgraded frequently, like IT equipment, payment or telecommunication systems, etc.
Tax advantages of operating leases
According to the ATO, operating lease payments and the GST included in the lease charges may be tax deductible during the lease term. Operating leases must also be recorded on your business balance sheet as a lease liability.
Asset loan pros & cons
Pros
- Repayments are fixed over the loan term
- Available with or without residual balloon payment to suit your business cash flow
- Option to pay an upfront deposit to reduce your loan amount & interest
Cons
- The lender can reclaim the asset if you default on the loan
- Business loans are not covered under the National Consumer Credit Protection Act (NCCP)
- Early payout fees may apply
Finance lease pros & cons
Pros
- Repayments are fixed over the lease term
- Option to own the asset at the end of the lease term
- If the asset's value increases by the end of the contract, you’ll only have to pay the amount agreed in advance, potentially resulting in a profit for your business
Cons
- Your business is responsible for all upkeep costs for the asset (e.g. maintenance, registration, insurance)
- Throughout the contract, you’ll pay close to the full value of the asset (plus interest), making it a pretty expensive option
- It may be difficult (and expensive) to cancel a finance lease before the lease term ends
Operating lease pros & cons
Pros
- Repayments are fixed over the lease term
- Maintenance and running costs are included in repayments
- You can cancel the lease before the term ends
Cons
- No option to own the asset at the end of the lease term
- You have to renegotiate and renew the lease after the contract period ends if you want to keep using the equipment/assets
- No potential gains from asset appreciation (since you never own the asset)
How to choose which asset finance option is best for your business
Is it more suitable to purchase or rent the asset?
For example, you may choose an asset loan if you prioritise actually owning the asset, particularly for company vehicles or equipment you rely on to run your business. On the other hand, you may prefer to lease assets that become outdated quickly, like IT or office equipment, or assets you only need for a short period of time (e.g. when scaling your business).
Will you still need the asset at the end of the finance term?
For instance, a removalist business financing a fleet of delivery vans would likely require the ongoing use of the vehicles after the finance term ends. In this case, an asset loan or finance lease with the option of ownership at the end of the lease term may be suitable. On the other hand, if you're a startup or technology firm, you may prefer the flexibility to upgrade the equipment during the lease term or to return it at the end. In which case, an operating lease may be suitable.
Are there any tax deductions available?
With an asset loan, interest on the loan, GST and the asset’s depreciation may be tax deductible. When you’re leasing an asset, you may not be able to claim depreciation as the lender owns the asset during the lease term, according to the Australian Accounting Standards Board (AASB). Speak to an accountant or tax professional about your options before making a decision.
Would you like the option to pay off the finance early?
Early payout fees generally apply to fixed-term asset finance contracts. However, it may be easier to pay off an asset loan early than a finance lease. That’s because leases are usually non-cancellable contracts and may be costly to terminate, according to the AASB.
Some asset finance options have a balloon payment option
This is a residual lump sum due at the end of the loan or lease term to pay the outstanding debt on the asset. The balloon payment can range from 20-40% of your finance amount, depending on your agreement with the lender. A balloon payment effectively reduces your regular repayments and can help preserve cash flow, but results in a larger amount owed at the end of the loan or lease term.
How to apply for asset finance
Applying for a business loan to finance an asset involved four key steps:
1
Compare asset finance rates & lenders
Doing your due diligence can go a long way. ‘Shop the rates’ between bank and non-bank asset finance providers and look at their customer reviews. If you’re using a finance broker, they can show you indicative asset finance rates, fees and features from different lenders. Comparing options like this generally doesn't impact your credit report. Just remember, the interest rate you're offered may differ from the lender's advertised rate.
2
Gather your documentation
You’ll need to submit financial documents to verify your business revenue. This will indicate whether you can repay the loan or lease over the term, including interest. Depending on the size and trading history of your business, you may be asked to provide six to 12 months of business bank statements, BAS statements and/or tax returns. Startups and new businesses may be asked to submit cash flow projections prepared by an accountant.
3
Submit your asset finance application
You can apply for asset finance directly via the lender’s online application portal. You’ll be asked some standard business questions (e.g. how long you’ve been trading, what industry you’re in, etc.) and information about the asset(s) you want to finance. You’ll also submit the requested financial paperwork at this stage. A lending specialist may call you to discuss your application or request additional information. If you’re using a broker, they will generally submit the application on your behalf to save you the hassle.
4
Get your asset finance application approved
Your lender will conduct a credit check through one of the main credit bureaus (e.g. Equifax, Experian, illion) before granting conditional or full approval. If your credit assessment meets the lender’s requirements, you could be approved for finance within a few hours or 1-3 business days if your application requires additional attention.
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