25.06.2018

Your assets as security

The way finance deals work is that funds are loaned against the value of an asset. This could be a building, a piece of machinery, a plot of land, or a vehicle or anything of value. The agreed value of the asset will dictate how much a finance company is willing to lend.

Firstly, lenders will look at the purchase price of the asset. This is straightforward if the asset is new and purchased from a reputable dealer; second hand machinery and equipment will need to be viewed and assessed. As a part of this they will consider the age of the asset, its condition, its service history, and the industry it is working in.

They will then consider the deposit you have to purchase the asset, and the LVR (Loan to Value Ratio); that is, what proportion of the asset’s value are you looking to borrow.

Different financiers can have differing appreciation of the value of an asset, and of its economic lifespan, which is why at Finance New Zealand we may use industry specialists, both within mainstream banks and with specialist lenders, when we’re looking to finance an unusual or uncommon piece of equipment. Often, a generalist banker won’t fully appreciate a specialist industry – its business cycles, peculiarities, equipment or technologies – so are unwilling to provide the maximum funds against the particular assets you have.

If you need funds to purchase an asset, talk to your business partner at Finance New Zealand to ensure you are able to fully realise the value in the asset.