Income-Producing Assets: What They Are and Why Lenders Fund Them First

At Nova Asset Rentals, we see this every day: the assets that gets approved fastest are the ones that can start making money immediately. If a truck, excavator or forklift can generate revenue as soon as its working, lenders are far more comfortable funding it.

An income-producing asset is simply equipment or a vehicle that directly creates cash flow for the business using it. If it earns, it can be funded.

What are income-producing assets?

In practice, the same asset classes appear repeatedly because their value and earning capacity are easy to understand.

The most common include:

• Prime movers and rigid trucks

• Trailers and transport equipment

• Excavators, loaders and backhoes (Yellow Goods)

• Forklifts and warehouse machinery

• Delivery vans and courier vehicles

These assets can be deployed quickly and tied to contracted or predictable work.

Conversely, we also see confusion around items that feel business-critical but don’t directly generate revenue, these include, but are not limited to:

• Office or factory fit outs

• furniture

• IT equipment

• general tools

They may support operations, but they don’t directly create identifiable income streams. That makes them harder for lenders to rely on.

So why do lenders prioritise these assets?

From a credit perspective, a business needs to demonstrate their ability to generate income. Assets, or access to assets that serve a purpose towards income generation is a key element in the assessment from a lender.

The ability for an asset to produce revenue straight away, helps cover some of the direct operating costs associated with owning the asset as well as doing business. Specifically thinking about direct costs such as:

• rental or finance repayments

• operating costs

• maintenance

• wages connected to using/operating it

That dramatically lowers risk for both a lender and the business.

Traditional lenders like banks would look at a business’ historic performance to determine whether they can repay a loan facility. At Nova we assess a transaction based on the asset’s ability to generate income. This is why we regularly see approvals for clients who might struggle to obtain through traditional bank facilities.

How does the Nova approval process work?

At Nova Asset Rentals, we start with a simple question: How will this asset pay for itself? The answer is usually a simple collection of information that we review in reaching an outcome. We consider:

• who will use it – experience of the client and their staff

• what work it will perform – critical work, in demand

• how quickly it begins earning – do they already have work contracts in place

• what it could be worth in the future – Does the asset hold value reasonably well or does it become obsolete/outdated in a few years?

Notice what’s missing? We’re not starting with tax returns, because in the case of strong income-producing assets, the equipment often tells the story.

Additionally, we find that many operators come to us having been rejected because:

• they’re a new ABN

• their financials are light

• they’ve had past credit issues

We’ll take the time to understand the asset and its earning capacity, and because of that approach approvals can move far quicker than they expect.

The bottom line

Banks tend to assess businesses from the top down. Nova is an asset specialist that assess from the asset up.

If the equipment is right, the pathway to approval becomes much easier and achievable.

If you’re looking for a truck, excavator or forklift that will be out working and producing income immediately, you’re heading in the right direction for what we would like to see and puts your business in a strong starting position for an Asset Rental Agreement with Nova.

Want to know more, get in touch with the Nova Asset Rentals team today

✅ Business Owners – Want to know if yours qualifies.

Call Jodie on 0474 967 320 or Kim on 0438 155 616, or enquire online: https://www.novaassetrentals.com.au/contact

✅ Finance Brokers – Got a client scenario you wish to discuss.

Call Willem on 0427 677 623 or Kim on 0438 155 616 and run the deal past us.