Asset finance is the financial product designed specifically for businesses that need to purchase equipment and machinery. However, certain limits do apply. Usually, there is a minimum spend required i.e. you would need to spend at least R50 000.
Given these restrictions, we will also discuss alternative ways of raising finance in your personal capacity. The amount of finance required for the purchase will dictate whether this is a viable option.
Personal versus business finance
Sometimes it is difficult to raise business finance, and perhaps you're considering raising the finance in your personal capacity instead. It is recommended to keep business finances separate from personal finances in order to protect your personal assets. However, this is not always the most practical advice for business owners who are in the early years of building their business.
The majority of businesses begin by using a portion of an owner’s personal savings. This means that nearly every business owner's assets are exposed to their business anyway because lenders often insist that owners sign personal surety for business finance. The important thing is to record the money in the business accounts as either equity or owner’s loan account.
Be sure to read the module Understanding Personal Surety before you sign personal surety agreements.
What are your options?
If your business is turning over more than R200 000 per month, and your equipment spend is greater than R50 000, then you could consider asset finance as an option.
Later we will discuss the types of equipment and machinery that asset finance can fund. If the cost of the equipment is not too high, you can consider using an overdraft, credit card or investigate if there is a government fund that suits your specific needs: