Asset finance is assessed differently from an unsecured business loan, because there is a machine in the middle of it. Understanding what moves the decision explains most of what looks arbitrary from the outside.
The short version
The shape of it
An unsecured lender has one line of defence, which is the borrower’s ability to pay. Where that fails there is nothing behind it, and the pricing reflects the exposure. An asset financier has a second position, and the whole of the difference in price and available amount comes from that.
The second position is only worth something if the asset is worth something in the financier’s hands rather than in the borrower’s. That distinction runs through the entire assessment. A machine that is central to a business and worth a great deal to it, but which has almost no resale market, supports the application far less than the applicant expects.
It follows that the asset is being assessed alongside the applicant rather than instead of them. A strong business with a weak asset and a weak business with a strong asset both produce complicated answers, and the applications that proceed easily are the ones where both sides are ordinary.
Unsecured asks
Can they pay
Asset finance asks
Can they pay, and what is it
Effect on price
Ordinarily lower
Effect on amount
Ordinarily higher
The asset
These sit behind the valuation and behind the term and rate offered. They are also the part of the application the business chooses, which makes them worth understanding.
A common machine with steady demand can be sold quickly and predictably. Specialised plant with a handful of possible buyers in the country carries a wider valuation discount, because the financier’s exit is harder and slower.
Serial-numbered goods can be registered against unambiguously and located later. Assets without a clear identifier are harder to secure properly, which affects both the appetite and the terms.
A financier prefers the asset to retain value across the term. An older machine on a long term produces a position where the debt outruns the asset early, which is a shape lenders avoid.
Documented servicing supports value in a way an assurance does not. On plant with hour meters, the recorded hours against the age of the machine is one of the first things looked at.
A machine that plainly belongs in the applicant’s operation supports the application. One that does not raises a question the applicant will be asked, and having an answer ready is better than being surprised by it.
The business
Broadly what any lender looks at, weighted differently because of the security. This is a general description rather than any particular financier’s policy.
01
How long the business has operated and how consistently. A longer record gives a financier more to assess, and a short one is not disqualifying where the asset and the serviceability are both sound.
02
Ordinarily the most informative document in the file. Patterns of income, the behaviour of the account through quieter months, and existing commitments are all visible there in a way they are not in a summary.
03
Other facilities, their payments and their security positions. A new facility is assessed against total obligations rather than against itself, which is why an application can succeed alone and fail alongside others.
04
Defaults, judgments and the pattern of past conduct. An explained historical issue is a different proposition from an unexplained current one, and financiers distinguish between them more than applicants expect.
05
Where a personal guarantee is sought, the position of the guarantor forms part of the assessment. Whether one is required at all varies by financier, by amount and by the strength of the rest of the file.
06
How the asset will be used, and in what sector. Some uses carry heavier wear, some sectors carry more variable income, and both are ordinary considerations rather than judgments about the applicant.
Serviceability
It is tempting to think that strong security removes the need to demonstrate serviceability, and it does not. A financier holding a machine worth more than the debt is still holding a machine rather than money, and realising it involves cost, delay and a customer relationship that has gone wrong. No lender writes facilities hoping to exercise its security.
What security does is change the consequence of failure rather than the assessment of its likelihood. That is why it lowers price and raises available amounts without removing the requirement that the payments look affordable from the trading position as it actually is.
The practical version of this is that a business should be able to point at where the payment comes from. Additional work the asset enables, a contract it services, or a cost it removes are all straightforward answers. An application that cannot answer the question is relying on the asset to carry the whole file, which is a weaker position than it feels like from the inside.
The process
Generalised rather than specific to any financier. The sequence is broadly consistent even where the detail is not.
01
Same day
The amount, the term and what the asset is. Where a specific machine has been identified, its details and the seller’s details come in at this point and materially speed everything that follows.
Documents commonly required
02
Depends on how quickly documents are gathered
Entity details, trading information and bank statements. A complete file at this stage is the single largest determinant of how quickly the rest moves, and an incomplete one is the most common cause of delay.
Documents commonly required
03
Varies by financier and by asset
The financier assesses the business and forms a view on the asset. On larger or more specialised items an independent valuation may be sought, which adds time to the process.
04
Ordinarily quick unless an interest is found
Confirmation that the seller is the entity it claims to be and that no unresolved security interest sits over the asset. Where an existing interest is found, it has to be dealt with before settlement rather than afterwards.
Documents commonly required
05
Depends on the seller as much as on the financier
The agreement is executed, funds go to the seller, and the financier registers its interest. The asset is delivered and the term begins.
The timings here are deliberately unquantified. They vary by financier, by amount, by asset and by how complete the file is, and a page that named a number would be describing a promise nobody made.
Common declines
General patterns rather than rules. A financier’s actual criteria are its own and vary considerably between them.
The machine is essential to the business and worth a great deal to it, and there are very few other buyers for it in New Zealand. The financier’s exit is the problem rather than the applicant.
What happens:A lower advance against value, a shorter term, or a decline that has nothing to do with the business itself.
The asset is fine and the business is genuine, and the proposed payment sits uncomfortably against what the bank statements show, particularly through the quieter part of the year.
What happens:A smaller amount, a longer term, or a request for a larger deposit to bring the payment down.
A security interest is found against the asset or the selling entity and has not been dealt with. This is not a credit issue and it stops the settlement regardless of how strong the rest of the file is.
What happens:Delay while it is resolved, or the transaction falling over where the seller cannot clear it.
Two of these three are visible before an application is made. A realistic view of the asset’s resale market and a look at the payment against the quietest month in the bank statements answer most of what a financier is going to ask.
Weighting
The same four factors are considered throughout. Their relative weight shifts with the structure and with what the financier is relying on.
| Feature | Purchase structures | Lease structures | Equity release |
|---|---|---|---|
| Weight on the asset | High | High | Very high |
| Weight on serviceability | High | High | High |
| Weight on the register position | High | High | Decisive |
| Weight on trading history | Moderate | Moderate | Moderate |
| Valuation basis | Purchase price | Purchase price and residual | Wholesale disposal |
Equity release against an owned asset puts the most weight on the register, because the financier is buying or lending against something the business already holds and clean title is the precondition rather than a detail.
The underlying idea
A financier is not deciding whether the business deserves the machine. It is deciding what happens in the version of events where the payments stop, and pricing the facility for the version where they do not.
Preparation
Recent bank statements, the most recent financial statements where the business has them, details of existing facilities and their payments, and the specifics of the asset including its serial number and the seller’s details. That list covers what is asked for in nearly every case, and having it assembled turns a week of back and forth into a single submission.
Alongside the documents, a short answer to two questions is worth preparing. The first is where the payment comes from, answered from the business as it trades rather than as it is hoped to. The second is why this particular asset, answered in terms of what it does for the operation.
Neither question is a test and both are asked routinely. An applicant with clear answers reads as someone who has thought about the purchase, which is not a formal assessment criterion and is not nothing either.
The levers
Deposit
A deposit reduces the amount financed, which reduces the payment and improves the financier’s position against the asset from the first day rather than gradually. It is the first thing suggested where serviceability is tight, and it works because it addresses both halves of the assessment at once.
It also changes the shape of the facility later. A larger deposit means the debt sits below the asset’s value earlier in the term, which is what keeps a trade-in clean at the end and keeps negative equity from forming.
Where the cash is available and has no better use, it is ordinarily the cheapest adjustment a business can make to an application. Where it is not available, saying so early is more useful than having a smaller amount offered without explanation.
Term
A longer term lowers the weekly payment, which helps serviceability, and raises the total cost while leaving the debt above the asset’s value for longer. Financiers weigh both, which is why a longer term is sometimes offered and sometimes declined on the same application.
The constraint from the financier’s side is ordinarily the asset rather than the applicant. A term that runs past the point where the machine holds meaningful value leaves the security thin at exactly the moment a facility is most likely to be in difficulty.
Matching the term to the working life of the asset, rather than to the lowest available payment, is the version of this that serves the business as well as the financier, and it is generally the term that gets approved without discussion.
The serviceability question
Serviceability starts with the weekly figure and the question of where it comes from. This produces the figure. Indicative only, and not a quote or offer of credit.
Indicative repayment
Weekly
$537/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
4 years at 11.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
Method
This describes how asset finance assessment generally works. It does not reproduce any financier’s criteria, thresholds or scorecards, because those are commercially confidential, they differ substantially between lenders, and a page stating them would be describing a policy nobody published. No approval times, approval rates or eligibility thresholds appear here for the same reason.
Nothing here is financial advice and nothing here is an indication that any particular application would be approved. This site is not a lender, a broker or a registered financial adviser, and the only party who can say what a financier will decide is that financier.
References
The register underlying the security checks described in the application process.
The register used to confirm entity details and directorships during assessment.
Where a New Zealand financier’s registration can be confirmed before an application is made.
The regulator whose guidance covers lender conduct and disclosure obligations.
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
It is assessed differently rather than more leniently. The asset gives the financier a second position, which ordinarily improves the price and the available amount, and the serviceability question is asked just as seriously either way.
No. A financier holding a machine is holding something it would have to sell, at cost and with delay, and no lender writes facilities hoping to do that. Security changes the consequence of a default rather than the assessment of how likely one is.
Because the financier’s position depends on what the asset is worth in its hands rather than in the business’s. A common machine with a deep resale market supports the file more than specialised plant with very few possible buyers, however valuable that plant is to the operation.
Ordinarily yes. A financier prefers the asset to hold value across the term, and an older machine on a long term produces a position where the debt outruns the asset early. That commonly shows up as a shorter term rather than as a decline.
Ordinarily entity and director details, recent bank statements, financial statements where the business holds them, details of existing facilities, and the specifics of the asset and the seller. A complete file at the outset is the largest single influence on how quickly an application moves.
It varies by financier, by amount, by asset and by how complete the file is, and this site does not publish timings. A financier will state its own, and that is the figure worth relying on.
It depends on the financier, the asset and the applicant. A deposit reduces the amount financed and the payment, which can be what brings a marginal application into range, and it is commonly the first thing suggested where serviceability is tight.
Sometimes, and it varies by financier, by amount and by the strength of the rest of the file. Where one is sought, the guarantor’s position forms part of the assessment, and the obligation being taken on is worth understanding before it is signed.
Not necessarily. Financiers distinguish between an explained historical issue and an unexplained current one more than applicants tend to expect. Raising it early with an explanation is ordinarily better received than leaving it to be found.
An unresolved security interest over the asset or the selling entity. It is not a credit issue and it can stop an otherwise complete transaction, which is why a register search early in the process is worth running rather than leaving to the financier to discover.
It forms part of the picture. Some uses carry heavier wear on the asset and some sectors carry more variable income, and both are ordinary considerations in an assessment rather than judgments about the applicant.
No. It describes how assessment generally works. This site is not a lender, a broker or a registered financial adviser, it does not know any financier’s criteria, and it cannot indicate whether a particular application would be approved.
Related
The PPSR and security interests
The register position that has to be clean before settlement.
Read onAll eight structures
What is being applied for, compared in one place.
Read onHire purchase against finance lease
The structural choice made before the application.
Read onBuying plant without using cash
The most common reason an application is made.
Read onOur finance partner
Where the referral goes, and what it does and does not suit.
Read onDisclaimer
Financing a machine is a commitment that runs for years, and the repayments come out of the same operating cash flow as everything else. Modelling the weekly and monthly cost against the working-capital position before committing is what this site is built for. Borrowing at a level that stays comfortable through a quiet quarter, rather than only through a strong one, is widely regarded as the safer frame.
What this site is
A calculator and information tool. Not a lender, not a broker, not a registered financial adviser. Nothing here is personalised financial advice.
What the figures show
Modelled estimates based on the inputs shown. Not a quote. Not an offer of credit. Not a guarantee of approval, rate or fees.
What the lender decides
Final rates, fees, and approval are set by the lender after a CCCFA-appropriate assessment of the applicant's circumstances and credit decision.
Commercial disclosure
Assetfinance.org.nz earns a commission from Prospa when a visitor applies through this site and their application is approved. The commission is paid by Prospa, not by the borrower, and it does not influence the rate Prospa offers. Full disclosure on the partner page.
Tax, GST, and accountant framing
Tax-treatment statements (GST claim timing, interest deductibility, depreciation rates) are general in nature and subject to the accountant's confirmation on the specific business position. For material amounts, professional advice from a registered financial adviser or chartered accountant is widely regarded as the safer frame.
