Let’s be real: money makes business move. Whether you’re just starting out, scaling up, or trying to stay ahead of the competition, you’re going to need capital. That’s where commercial and asset finance steps in.
Sounds fancy? It’s not. In plain terms, it’s borrowing money to either buy assets (like trucks, machines, computers) or to fuel your business’s day-to-day operations. Simple.
This guide will walk you through it without the fluff. Just what you need to know, how it works, and how to avoid some common faceplants along the way.
What is Commercial and Asset Finance?
Break it down like this:
- Commercial finance = borrowing money to fund your business overall. Could be for paying staff, buying inventory, covering bills during a slow season.
- Asset finance = borrowing specifically to buy or lease assets. “Assets” just means stuff your business needs — vehicles, equipment, IT systems, heavy machinery, whatever keeps you moving.
They’re cousins. You’ll often hear them mentioned together because businesses usually need both at some point.
Types of Commercial Finance
1. Business Loans
Straight-up loans. Bank (or another lender) gives you cash. You pay it back over time with interest.
Good for: Expansions, renovations, big purchases.
2. Lines of Credit
Think of it like a credit card for your business. You borrow what you need, when you need it, up to a set limit. Only pay interest on what you use.
Good for: Covering gaps in cash flow, seasonal businesses.
3. Invoice Financing
If your clients take forever to pay, invoice financing gets you most of the cash upfront. You hand over unpaid invoices to a lender, and they give you a chunk of it now.
Good for: Companies with lots of unpaid invoices stacking up.
4. Trade Finance
Helps you buy goods (local or international) even before you’ve sold anything.
Good for: Importers, exporters, wholesalers.
Types of Asset Finance
1. Equipment Loans
You borrow money specifically to buy a piece of equipment. The equipment itself often acts as the security for the loan.
Good for: Farmers, tradies, factories, tech companies.
2. Lease Agreements
You don’t own the equipment. You lease (rent) it. Usually cheaper short-term, but no ownership unless you choose to buy it later.
Good for: Businesses that need to upgrade equipment often.
3. Hire Purchase
You “hire” the equipment and pay it off over time. Once you’ve made all the payments, you own it.
Good for: Businesses wanting to eventually own expensive assets.
4. Chattel Mortgage
A loan for an asset where the lender uses that asset as security. Once you repay the loan, the asset is all yours.
Good for: Buying vehicles and heavy equipment.
How Commercial and Asset Finance Works
It’s pretty straightforward, but let’s spell it out:
- You apply for the money (loan, lease, whatever fits).
- Lender reviews your application — looks at your credit, cash flow, business plan, etc.
- If approved, you get the funds (or the asset).
- You repay in regular chunks, usually monthly, with interest.
Simple, but don’t rush. There are a few things that can trip you up if you’re not paying attention.
What Lenders Look At
Not everyone gets approved. Here’s what lenders usually want to see:
- Business financials (profit/loss statements, balance sheets)
- Tax returns
- Cash flow history
- Credit history (both personal and business)
- Business plan (especially if you’re new)
- The asset itself (if it’s asset finance)
Tip: Even if you have a great business idea, sloppy paperwork can kill your chances. Keep your financials clean and ready.
Benefits of Commercial and Asset Finance
- Preserve cash flow: You don’t have to fork out big money upfront.
- Flexible terms: Choose repayments that match your business cycle.
- Tax benefits: Some finance options offer tax deductions (talk to your accountant).
- Upgrade easily: Especially with leases — you can swap to newer gear often.
- Boost growth: Big purchases that seemed out of reach suddenly become doable.
Risks You Need to Know
- Debt is still debt: Borrowing too much can squeeze your cash flow later.
- Repossession: If you can’t pay, the lender can take back the asset.
- Interest adds up: Even a small interest rate stacks over time.
- Hidden fees: Some contracts have nasty surprises — early repayment penalties, maintenance costs, insurance requirements.
Always read the fine print. Or better yet, have someone you trust read it too.
How to Pick the Right Finance Option
Here’s a simple checklist:
- What do I actually need? Cash? Equipment? Working capital?
- How long will I need it? Months? Years?
- Can I afford the repayments? Even if business slows down?
- Am I OK with not owning the asset? (if leasing)
- What’s the total cost? Not just the monthly payment, but total repayment over time.
If you’re stuck, talk to a broker. A good one will help you find deals you didn’t even know existed.
How to Apply (Without Losing Your Mind)
- Get your docs together: Financials, business plans, ID, tax records.
- Shop around: Don’t just walk into your bank. Compare lenders.
- Be honest: Lenders hate surprises more than bad numbers.
- Negotiate: Rates, fees, terms — most things are up for discussion if you ask.
- Read before signing: Always, always, always.
FAQs About Commercial and Asset Finance
Q: Can startups get commercial or asset finance?
A: Yes, but it’s harder. Startups usually need a solid business plan, some personal guarantees, or security (like property).
Q: Is it better to lease or buy equipment?
A: Depends. Leasing is good if you want to stay updated with the newest gear. Buying is better if you plan to keep the equipment for a long time.
Q: How fast can I get finance?
A: Some lenders move fast — 24 to 48 hours. Others take weeks. If you need money quick, mention it upfront.
Q: What’s the catch with low-interest offers?
A: Sometimes, low interest rates hide big fees elsewhere — setup fees, early exit fees, insurance add-ons. Always look at the total cost.
Q: Can I get asset finance for second-hand equipment?
A: Yep. Not every lender offers it, but many do. The equipment just needs to be in good shape.
Q: Will applying hurt my credit score?
A: One or two applications? Probably not much. Multiple applications in a short time? Could be a red flag to lenders.
Final Thoughts
Commercial and asset finance isn’t rocket science. But it is serious business.
Done right, it can power your growth without wrecking your cash flow.
Done wrong, it can saddle you with debt you don’t need.
The golden rule? Borrow smart, not desperate.
Know what you’re signing. Know what you’re paying. Have a plan to repay it — even if things get bumpy.
At the end of the day, finance should help your business, not strangle it.
Stay sharp, ask questions, and don’t be afraid to walk away if something doesn’t smell right.