Having the right equipment can make or break a growing business. But paying upfront for machinery, vehicles, or specialist tools can quickly drain cash reserves and put pressure on day-to-day operations. Asset finance allows businesses to secure what they need to operate and grow, without tying up large amounts of capital in a single purchase.

Whether you are expanding capacity or replacing ageing equipment, understanding how asset finance works can help you choose a funding approach that supports both cash flow and long-term plans.

Asset finance explained

Asset finance is a way for businesses to access essential tools and equipment without needing to cover the full cost upfront. Rather than paying the purchase price in one hit, the cost is spread across an agreed term, making it easier to manage alongside everyday expenses.

This type of funding is commonly used for equipment financing, whether that is heavy machinery, specialised tools or a new work vehicle. In most cases, the asset itself is used as security, which allows you to start using it straight away while keeping working capital available for wages, stock and other operating costs.

Let us say you run a mobile mechanics business where bookings are increasing, but you are limited by the number of vehicles available. A $34,000 commercial van would allow you to take on more clients, but paying for it outright will put a huge strain on cash flow. With asset finance, you could secure the vehicle with a smaller initial outlay and manageable weekly repayments, while the van begins generating income as soon as it is on the road.

Prospa’s loan calculator lets you see what repayments could look like for your business.

Asset finance options

Asset finance can be set up in a few different ways, depending on whether your priority is owning the asset outright or simply having access to it for a period of time. The most common options include:

Hire purchase: You gain use of the asset immediately and repay its cost over time through regular instalments. Ownership transfers to your business once the final payment is made. This structure is often suited to higher-value purchases such as vehicles or machinery that you expect to keep and use for many years.

Leasing: It is ideal for situations where ownership is not essential. It allows you to use the equipment you need with predictable outgoings and, in many cases, the option to upgrade more frequently. Depending on the lease type, there may also be an opportunity to purchase the asset at the end of the term. The two main lease types are:

  • Operating lease: The asset is rented for an agreed period and returned at the end of the lease. Ownership remains with the lender throughout, and maintenance may be included. This option can suit businesses that replace equipment regularly or only need it for part of its working life.
  • Finance lease: The lender keeps legal ownership of the asset while your business has full use of it and makes fixed repayments over an agreed term. At the end of the lease, you may have the option to buy the asset. This can suit businesses that want flexibility from the start, while keeping the option open to retain the equipment if it continues to deliver value.

Choosing the right asset finance for your business

If your goal is to: And your priority is: Consider this option
Own the asset once repayments are complete Achieving ownership via structured repayments Hire Purchase
Replace regularly or stay current with new models Predictable costs and straightforward upgrades Operating Lease
Use the asset now and decide on ownership later Flexibility at the end of the term Finance Lease

In your mobile mechanics business, if you tend to keep vehicles on the road for as long as they remain reliable, a hire purchase may be a good fit, as ownership transfers to your business once repayments are complete. If upgrading vehicles regularly is a priority and you would rather avoid long-term ownership, an operating lease can make it easier to manage costs and move into newer models as needs change. A finance lease sits in between, giving you use of the vehicle now while leaving the decision to purchase until later.

When applying, lenders typically review recent bank statements, identification, and key financial information, including six months of trading history. Like most small business loans, both documentation and security requirements are influenced by how much is being borrowed and why.

Benefits of asset finance

Asset finance allows you to secure the tools you need to grow without putting a strain on your day-to-day operations. Here is why it is a popular choice for savvy business owners:

  • Protect your working capital: Spreading repayments over an agreed term helps keep cash available for wages, stock, marketing, or unexpected expenses, instead of tying it up in a single purchase.
  • Upgrade when you need to: You do not have to wait until the full purchase price is saved. This can make it easier to take on larger jobs, improve efficiency, or replace ageing equipment sooner.
  • Plan with more certainty: Fixed repayments and set terms make it easier to forecast cash flow and understand how the finance fits into your monthly budget.
  • Limit additional security: Asset finance is often secured against the equipment or vehicle itself, reducing the need to provide other forms of collateral.
  • Potential tax advantages: The structure you choose can affect how costs are treated for tax purposes. Depending on the arrangement, you may be able to claim interest, depreciation, or GST.
Asset finance benefits Asset finance benefits Asset finance benefits

Asset finance and taxes

At tax time, the differences between hire purchase, operating leases, and finance leases can cause confusion for many business owners. Legal ownership and tax ownership do not always line up. A business may use an asset every day without legally owning it, while Inland Revenue may still treat it as yours for tax purposes.

Your choice of finance structure affects which tax deductions may be available, including depreciation, interest or GST. As each option is treated differently for tax purposes, it is often worth speaking with your accountant before committing. Having recent tax returns or related financial information ready can support those conversations.

Comparing asset funding options

Asset finance is one way to fund a new purchase, but it is not the only option available. While the end result might be the same, with a business loan:

  • Your business owns the asset immediately, without lease terms or residual arrangements.
  • For loans up to $150,000, no upfront security may be required.
  • Loan funds can be used not only for the asset itself, but also for related costs such as installation, training, or delivery.