When it comes to securing asset finance, it could take some businesses several weeks to get the approval whilst others may have taken delivery of the asset in a matter of days. The key to getting your equipment or vehicle finance approved is by educating yourself on what it takes to get the approval. The worst scenario is you end up experiencing death by additional information requests, just to spin wheels and go nowhere. In this post, I will explain the roadmap you can follow to accurately determine what requirements you need to meet, namely, low doc, mid doc or full doc asset finance.
Lo Doc Asset Finance
When applying for asset finance, the low doc option requires the simplest criteria. This is reserved for business owners who have an ABN of more than 2 years, and GST registration of more than 1 year, and they are purchasing a primary or secondary asset. We covered examples of these assets in my previous blog post, but they are basically assets with the highest resale appeal such as cars, trucks and earth moving equipment.
Depending on the lender, there may also be an additional requirement to be a property owner or have a 20% deposit, or a comparable credit reference. For low doc, there is no income verification required, only a standard ID and credit check if all of these criteria are met.
Mid Doc Asset Finance
Mid doc is the next level up where the ABN and GST registration are less than 2 years, but more than 1 year, or it is a tertiary asset being purchased. This may also be called “lite doc”, and that is because there is some income verification, for example, BAS statements and/or business bank statements. Owning a property is, again, advantageous here, as it can soften some of the requirements, depending on the lender. For example, it can shorten the length of the bank statements to be supplied. Depending on the lender and scenario, you may also be asked to supply ATO portal statements to confirm your tax commitments are up to date.
Full Doc Asset Finance
The most arduous pathway of all, which is full doc. This traditionally means providing 2 years of financials and tax returns, as it is for businesses financing a particularly niche asset, or where they don’t meet any of the previous requirements.
If you have a startup, meaning the business’ ABN is only 6 months old, then you will also need accountant-prepared cashflow projections and a business plan. Where this option does not yield significantly better loan terms, there are generally little benefit for going down this path, you may even consider a low or mid doc option that costs more, but requires less effort and is faster.
Speak to a Broker
Finally, my advice is you if you are looking to secure asset finance, don’t just call your existing lender or pick the first option on Google. Instead, find asset finance brokers who can put you in the driver’s seat to making a business decision whilst managing all the distractions of applying for a loan for you.
For more asset finance tips, please stay tuned or head to our Youtube channel – “Asset Finance Series“.