Commercial and Asset Finance

Commercial and Asset Finance

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Commercial and Asset Finance

Commercial and Asset Finance

Commercial and Asset Finance 101: A Simple Guide

So, what exactly is Commercial Finance?


Think of commercial finance as a way for businesses to get the money they need to run, grow, or tackle new projects. Whether it’s a startup needing funds to get off the ground or an established business looking to expand, commercial finance is like a lifeline to keep things moving. It could be a loan, a line of credit, or even using unpaid invoices to get quick cash.

And Asset Finance?


Asset finance is a bit more specific. It’s all about helping businesses buy or lease important stuff like vehicles, machinery, or equipment. Instead of paying a huge chunk of money upfront, asset finance lets you spread the cost over time. It’s especially handy when your business needs big-ticket items but you’d rather not drain all your cash at once.

Okay, so what’s the difference between the two?


The difference is in the focus. Commercial finance is pretty broad—you can use the funds for just about anything business-related. Asset finance, however, is tied to, well, assets. So, if you need a new delivery van or some high-tech equipment, asset finance is your go-to option.

Types of Commercial Finance
  • Term loans: You get a lump sum of cash, then pay it back over time, with interest. Simple!
  • Lines of credit: It’s like a business credit card. You can borrow what you need, when you need it, and only pay interest on what you’ve used.
  • Invoice financing: Got clients who owe you money but you need cash now? You can use your unpaid invoices to get a quick loan.
Types of Asset Finance
  • Hire purchase: You pay in installments, and when you’ve made all the payments, the asset is yours!
  • Finance lease: You lease the asset and pay for it over time, but you don’t actually own it at the end—though you might get the option to buy it at its current value.
  • Operating lease: You rent the asset for a certain time and return it when you’re done. No ownership, but also no hassle. 

 

Why would a business choose Asset Finance?


It’s a great way to get your hands on expensive equipment without blowing through your cash reserves. If you’re in construction, for example, and need a crane or some fancy machinery, asset finance makes it affordable by letting you spread out the payments.

And why Commercial Finance?

It’s all about flexibility. Maybe you need to cover payroll while waiting on payments, or you’ve got an opportunity to expand but need extra funds to make it happen. Commercial finance helps you keep the wheels turning.

Things to keep in mind:
  • Can you afford the repayments? Make sure the monthly payments work for your budget.
  • Interest rates: Shop around and find the best deal. The lower, the better!
  • Collateral: Some loans might require you to put up assets as security, so make sure you’re comfortable with that.

 

In short, commercial finance and asset finance are like two sides of the same coin, each offering businesses a way to fund their needs, whether it’s general growth or acquiring key equipment.

 

ABOUT THE AUTHOR 

Jeff Budden is the Business Owner/Senior Broker of Interstate Finance and Leasing with 22 years experience in the NAB Bank before merging into IFL in 2011. He’s terrible at Golf and Tennis although he thinks he is pretty good.