Asset Finance

Asset finance is the process of securing funding for the purchase of physical assets (such as vehicles, equipment, or machinery) through a financial arrangement. This type of financing is typically used by businesses, but individuals can also use asset finance to acquire assets without paying the full purchase price upfront.

Types of Asset Finance:

• Mortgage: A loan where the borrower takes ownership of the asset (such as a vehicle or equipment) immediately, but the lender holds a mortgage over the asset until the loan is paid off. Once the loan is fully repaid, the borrower owns the asset outright.
• Hire Purchase: This is a form of financing where the borrower hires the asset with an option to purchase it at the end of the agreement, typically by paying a balloon payment. Ownership of the asset is transferred only after the final payment is made.
• Leasing: With a lease agreement, the borrower rents the asset for a specified period, and at the end of the lease term, they may have the option to purchase the asset, renew the lease, or return the asset. Commonly used for vehicles or equipment.
• Chattel Mortgage : A chattel mortgage is a loan agreement where the borrower uses movable personal property, such as a vehicle or equipment, as collateral while retaining ownership and use of the asset.
   

Common Uses of Asset Finance:

• Business Expansion: Companies can use asset finance to acquire the equipment or machinery they need for growth without depleting working capital.
• Tax Benefits: Depending on the arrangement, businesses may be able to claim depreciation on the asset and any interest or lease payments as tax deductions.
• Cash Flow Management: Asset finance can help businesses manage cash flow by spreading the cost of an asset over time.

Key Considerations:

• Interest Rates and Fees: The interest rate on asset finance is typically higher than conventional loans since the asset itself serves as collateral.
• Depreciation: Assets used for financing can depreciate over time, which might affect the overall cost and value.
• Security: Most asset finance arrangements are secured loans, meaning the lender holds a claim over the asset until the debt is repaid.

In summary, asset finance is a flexible way for individuals or businesses to acquire assets without needing to pay upfront, making it an attractive option for managing cash flow, spreading out costs, and using assets to grow.

Contact LMK Finance today to discuss your asset financing needs:

📞 0452 636 709
📧 vinay@lmkfinance.com.au