Every growing business hits the same wall at some point. You need a second truck, a bigger machine, a new fit-out or a fleet refresh, and the quote lands with a number on it that would empty your account. Paying cash feels responsible, but it can leave you with an excellent asset and no working capital.
Asset finance exists to solve exactly that. Instead of buying the equipment outright, you spread the cost over the period the asset actually earns its keep, and the asset itself usually does the heavy lifting as security.
Here is how it works in New Zealand, what the different structures mean in practice, and what lenders will want to see before they say yes.
What asset finance actually is
Asset finance is lending secured against a specific business asset rather than against your home or your business as a whole. That distinction matters more than it sounds.
Because the lender can see, value and if necessary recover the asset, the risk profile is different from an unsecured business loan or an overdraft extension. That usually means better pricing, faster decisions and, importantly, no need to tie up your property equity or your existing bank facilities.
The assets commonly financed in New Zealand include:
- Trucks, utes, vans and full fleets
- Excavators, loaders, forklifts and construction plant
- Manufacturing machinery and processing lines
- Commercial kitchen and hospitality equipment
- Medical, dental and veterinary equipment
- IT hardware, servers and point of sale systems
- Agricultural machinery and irrigation
The general rule is that the asset needs to be identifiable, durable and have a resale market. Highly specialised or fast-depreciating gear is still fundable, but the terms tighten.
The four structures, and when each one fits
Most of the confusion around asset finance comes down to terminology. There are really only four common structures, and the difference between them boils down to two questions: who owns the asset, and what happens at the end of the term.
Hire purchase
You use the asset from day one, the lender holds title until the final payment, and ownership transfers to you at the end. It sits on your balance sheet as an asset and a liability, and you claim depreciation on it.
Best for assets you intend to keep and run for years. A truck you will still be using in eight years is a hire purchase candidate.
Equipment loan or chattel mortgage
Functionally similar to hire purchase, but you own the asset from the outset and the lender registers a security interest over it on the Personal Property Securities Register (PPSR). Repayments are usually structured with a fixed term and, where it suits your cash flow, a balloon payment at the end.
Best for straightforward purchases where you want ownership immediately and clean tax treatment.
Finance lease
The lender buys and owns the asset, you lease it for a set term, and at the end you typically have an option to purchase or extend. In substance you carry most of the risks and rewards of ownership, and the accounting reflects that.
Best where you want the asset long term but prefer the payment structure and the lower upfront outlay.
Operating lease
The lender owns the asset, you pay to use it for a defined period, and at the end you hand it back. Payments are treated as an operating expense, and the asset does not sit on your balance sheet in the same way.
Best for equipment that dates quickly or needs regular upgrading. IT hardware, some vehicle fleets and technology-dependent gear often fit here. It is also the right answer when residual value risk is something you would rather the lender carried.
A quick comparison
| Hire purchase | Equipment loan | Finance lease | Operating lease | |
| Who owns it during the term | Lender | You | Lender | Lender |
| Own it at the end | Yes | Yes | Usually optional | No |
| On your balance sheet | Yes | Yes | Yes | Generally no |
| Residual value risk | Yours | Yours | Usually yours | Lender’s |
| Typical use | Long-life plant | Vehicles, machinery | Long-term use, lower outlay | Fast-obsolescing gear |
There is no universally better option. The right structure depends on how long you will use the asset, what it will be worth at the end, how your accountant wants it treated and how your cash flow moves through the year.
The tax and GST angle
Different structures carry different tax outcomes, and this is where a conversation between your adviser and your accountant pays for itself.
In broad terms:
- Under hire purchase or an equipment loan, you generally claim depreciation on the asset and deduct the interest component of your repayments. For a GST-registered business on the invoice basis, the GST on the asset can usually be claimed at the start of the agreement rather than drip-fed over the term, which can be a meaningful cash flow event.
- Under an operating lease, the payments are typically deductible as an operating expense, and GST is generally claimed on each payment as it falls due.
- Finance leases sit in between and depend on the specific terms of the agreement.
This is general information rather than tax advice. Confirm the treatment with your accountant before you sign, because the structure you choose is difficult to unwind afterwards.
What lenders actually look at
Asset finance applications are assessed differently from a home loan. Lenders are weighing up two things at once: the strength of your business and the quality of the asset.
Trading history. Most mainstream lenders want to see at least two years of trading, though newer businesses can often be placed with specialist lenders on adjusted terms.
Cash flow and serviceability. Recent financial statements, year to date management accounts and often your last few GST returns. Lenders want to see that the repayment is comfortably covered by trading income, not funded by hope.
The asset itself. Age, condition, make, expected life and how easily it could be sold. A five year old excavator from a mainstream brand is straightforward. A bespoke piece of machinery with three potential buyers in the country is a harder conversation, and the deposit requirement will reflect that.
Deposit. Many deals are written with no deposit where the asset and the business are both strong. Older assets, specialised gear or shorter trading histories usually attract a deposit between 10 and 30 percent.
Existing commitments. Lenders will look at what other finance you already carry, including anything registered on the PPSR.
Supplier and invoice detail. Whether you are buying from a dealer, at auction or privately changes the process, and private sales carry extra verification steps.
Where asset finance beats the alternatives
Business owners often default to the two options they already know: pay cash, or ask the bank to extend the overdraft. Both have a real cost.
Paying cash converts liquid working capital into an illiquid asset. The equipment might last a decade, but the cash gap is felt this quarter, and it is the buffer you would otherwise draw on when a client pays late or a season runs slow.
Extending an overdraft or drawing on your existing bank facility eats into the same limit you rely on for day to day trading, and it is often secured against your home. Asset finance keeps that line free and puts the security where the risk actually sits.
There is also a matching argument. If a machine will generate revenue for seven years, funding it over five with payments drawn from the revenue it produces is simply better financial hygiene than funding seven years of use from one quarter’s cash.
Common mistakes worth avoiding
Financing on term length alone. A longer term lowers the payment and raises the total cost. Match the term to the useful life of the asset, not to the payment you would prefer to see.
Ignoring the balloon. A large residual payment at the end makes the monthly number look excellent and creates a problem for future you. Know exactly what falls due and when, and have a plan for it.
Taking the dealer’s finance without comparison. Vendor finance is convenient and occasionally very sharp, particularly when a manufacturer is subsidising a rate. It is not automatically the best deal available, and it is worth having something to compare it against.
Applying to multiple lenders at once. Scattered applications leave a trail and rarely improve the outcome. A single, well-prepared application to the right lender is far more effective.
Leaving your accountant out of it. The structure affects your tax position, your balance sheet and your covenants. Loop them in before you commit, not after.
Frequently asked questions
How long does asset finance approval take in New Zealand?
Straightforward applications with complete documentation can be approved in one to three working days. More complex deals, private sales or specialised assets take longer, usually a week or two.
Can I get asset finance for a used machine?
Yes. Lenders will look at the age of the asset and its expected remaining life, and terms are usually shorter for older equipment. Most will fund used assets up to a certain age at settlement and a maximum age at the end of the term.
Do I need to use my house as security?
Generally no. That is one of the main reasons businesses use asset finance. The asset itself provides the security, though personal guarantees from directors are common.
What if my business is only a year old?
It is still possible. Newer businesses tend to need a deposit, a stronger cash flow position or director support, and are often better matched to a specialist lender than a main bank.
How are asset finance rates set?
Pricing is risk-based rather than a published rate card. The asset type and age, the term, your trading history, the deposit and the lender all move the number. Two businesses buying identical equipment can be quoted quite differently.
Getting it right the first time
Asset finance is one of the few areas of business lending where the structure matters as much as the rate. The wrong structure can cost you tax efficiency, tie up security you needed elsewhere or leave you with a residual payment you did not plan for.
At Lendal Mortgages we work across a wide range of lenders who specialise in business assets, from the main banks through to funders who focus on specific industries and equipment types. We will look at how the asset fits your business, match it to the lender whose policy actually suits the deal, and handle the application from first conversation through to settlement.
If you are weighing up a purchase, get in touch for a straightforward conversation about your options. You can also read more about our asset and equipment finance service, or explore our other commercial services.