Companies often encounter circumstances where they need easy business loans for smooth operations. It is significant to understand that getting a business loan every time you face a financial crisis will not help. To reach the maximum potential, you must select the right tools. One such tool is asset financing.
Purchasing new machinery can enhance your products and services. But sometimes, the purchase may disrupt the cash flow. Asset or equipment financing helps businesses buy tools and machines without affecting the other business expenses.
How to apply asset business finance in Australia?
Here is the summary of everything you need to apply for asset financing.
1. Do some research on your own
Asset financing covers everything you need for your business, be it heavy machines or new offices. It is always a good idea to research the asset type you want to fund. Thus, go around and shop for loans and lenders. Jot down all the options you have, including the preferred models and brands. It will give you an exact idea of how much money you need from lenders.
2. Stick to your budget
Fix a budget and stick to it. Decide only the amount which you can repay. Do not end up with something that you will struggle to repay later. Even if you get bridging finance, stick to a mortgage payment you can pay back without affecting the business cash flow. Equipment financing is to boost the productivity of your business and not for putting you in a situation of financial stress.
Do not forget that apart from paying the monthly instalments of the loan, you also have to pay insurances, property taxes, maintenance charges, and more. When you are a business owner, you have several other expenses to manage and worry about. If you are not careful in deciding a budget, the extra expenditures can impact your cash flow. So, fix a budget by keeping a check on all your expenses.
3. Explore all loan types
Numerous lenders are available in the market for asset finances with their terms and conditions. Analyze all the options to know which one is best for you. Choose a loan type that will reap maximum profits, is affordable, and offers flexibility.
4. Collect all the required documents
Lenders will check several documents to check your eligibility as a borrower. It determines the rate and amount of bridging finance that you can borrow. The exact number of documentation you need will depend on your lender and the type of loan. Whatever your choice, keep the following things handy:
- Passport, driving license, or Medicare card for your identification
- Cash flow projections to give an idea of your assets and liabilities to the lender
Apart from the above, other documents that the lender can ask you for are:
- Bank statements
- Profit & loss statements
- Balance sheet
- Cash flow statements
You will also have to provide your income declaration either by an accountant or yourself and an affordability statement. These are necessary for low-document easy business loans provided by traditional lenders, private lenders normally do not have this requirement.
5. Plan out which type of equipment financing you need for your business
There are different types of equipment financing that you can approach the lenders for. A few to name are leases, chattel mortgages, and hire purchase agreements. You have to choose a type depending upon the level of flexibility of the loan, your access to collateral, and how long you need the equipment in your business.
6. Search for the right lender
Searching for the right lender for business finance in Australia is vital. Different lenders ask for varied fees, rates, and eligibility criteria. Things are not simple because a mortgage with a low-interest rate does not always guarantee a cheaper or better product. Sometimes a loan with a lower rate of interest may be less flexible. Some lenders, although asking for lower interest rates, charge additional fees making the loan more expensive in the long term.
Also, note that banks have a stricter selection process compared to non-bank lenders. Traditional financing systems also have a longer application process and stringent criteria. The level of the leniency of non-bank lenders is less. They provide funds quicker and settle loans earlier than banks. The downside of bridging finance from non-bank lenders is a high-interest rate. But it is a worthwhile investment for small businesses who need fast access to funds for their business. After all, you are borrowing money to get a new piece of equipment that will enhance your productivity.
7. Applying for the loan
The primary steps are deciding on the loan type and lender that best suits your needs, circumstances, and flexibility. Then follow the application procedure of easy business loans according to your chosen lender. The turnaround time is different, depending on the chosen lender and the type of loan. But generally, you will get the funds in your account within a few days or weeks.
Summing It Up
Buying a new piece of equipment for your business can be costly and time-consuming. Asset business finance Australia is of great help to fund new tools, machinery, or a workplace for your company. Explore the various lenders out there in the market to find a lender that suits your needs. Prepare a budget, check on your credit score, keep all the documents ready, and apply.
