As a sole trader, any time you take away from your business to apply for finance is money out of your pocket.
However, a big advantage as a sole trader is you have access to commercial finance solutions that can be quick and easy to secure.
Low-doc asset finance applications can be done in minutes if you know the right lender for your situation.
In this article, we’ll discuss the pathways to securing asset finance for a sole trader and how to shortcut the process for the best outcome.
Key Takeaways: Sole Trader Asset Finance
| Access Commercial Rates | Even as a one-person operation, sole traders qualify for commercial asset finance, which can have better rates and tax benefits than personal loans. |
| Low-Doc Fast Track | If you have clean credit and a registered ABN, you can often get approved for a Low-Doc loan in minutes using only your ID and ABN. |
| Trading History Matters | Some lenders will finance specific trades after just 1 day of ABN registration, but 6 to 12 months unlocks far more lender options. |
| GST Registration | You don’t have to be registered for GST to get a loan, but being registered unlocks larger loan limits and smoother approvals. |
Sole Trader Asset Finance Structures
Asset finance can fund business-critical tools like work vehicles, heavy equipment, and machinery.
Sole traders typically choose between three structures based on their expected ownership timeframe and tax situation:
- Chattel mortgage
- Finance lease
- Hire purchase
If you want immediate ownership to maximise depreciation tax claims, an ownership-style loan works best.
If you prefer regular upgrade cycles, choose a lease.
Learn more about commercial finance types here.
You should always confirm the most tax-effective product with your accountant before signing the agreement.
How Lenders Assess Sole Traders
Even though a sole trader is a one man operation, they still have access to commercial finance options in most cases.
This means the business is as important to the lender when assessing the application.
Trading History
Some trades may be eligible for sole trader finance just one day after ABN registration.
However, the longer the history the more options you will have.
Most other industries require at least 6 months to qualify for asset finance, but after 12 months you will have many more options available.
There may be more flexibility on your minimum trading history if you are a property owner and willing to provide a director’s guarantee.
Business Documentation
The required documents will vary depending on your situation and the category of loan you are applying for.
A low-doc loan application only requires proof of ID and your ABN registration. That’s it!
Being GST registered will also improve your application (but it’s not always required).
Depending on the type of asset you are financing you can be approved very quickly for this type of loan.
If more comprehensive documentation is required the application will take longer to assess and could require a combination of these additional documents:
- Accountant letter
- Business Activity Statements
- Up to 6 months of business financials
- Tax returns (up to two years)
- Evidence of cash to be used for a deposit
- Details of property owned
A valuation report may also be required for the asset being financed if it is a more complex asset.
The Sole Trader’s Credit History
The credit history of the person running the business is also key to achieving a fast outcome.
Generally, a credit score over 500 will usually be ok for low-doc options and competitive rates.
Below that threshold things become more difficult (and expensive).
Applying for Asset Finance
Step 1: Preliminary Assessment
Engage a broker to review your business and credit profile before submitting a formal application.
This will protect your credit score and save you a lot of time in preparing for lender submission.
Step 2: Finding the Right Lender
The most important part of the process is to identify the lender who is most likely to accommodate your specific situation.
Our brokers have a working relationship with a panel of commercial asset lenders and will know where you will get the best deal.
Given how individual business-related loan applications are, this inside knowledge can make all the difference.
Step 3: Formal Application and Assessment
The broker will ensure a complete and well rounded set of documents is submitted that aligns with that lender’s requirements.
This will ensure a speedy assessment and outcome.
Our brokers also have a direct line to people working within the lender and are able to provide important context for things outside of the norm.
This ensures a fair and accurate credit assessment.
Step 4: Approval and Settlement
Once all the boxes are ticked a conditional approval would be provided.
This is often done to ensure that the asset or equipment being financed is defined prior to the purchase being completed.
A security interest would be registered against the asset at the time of settlement and the purchase funded by the lender.
Frequently Asked Questions
Can I get asset finance without tax returns as a sole trader?
Yes, through a low-doc loan. Lenders use business bank statements or BAS as income evidence instead of formal tax returns. Approval depends on your credit profile, the chosen lender, and the asset type.
How long do I need an ABN to get finance as a sole trader?
A longer trading history broadens your lender options. Some lenders only require one day for certain trades, many more will lend if your ABN is over six months old. Most will from 12 months and beyond.
Do I need to be GST registered to get asset finance?
No, but you will restricted to a lower maximum loan amount if you are not registered for GST. To access larger loans and a broader set of potential lenders registeration for GST is needed.
Fast Sole Trader Finance Strategies
The fastest pathway to an approval is a low-doc asset finance application placed with the most suitable lender.
Our team frequently gets these approved and settled on the same day as the initial inquiry allowing the sole trader to get back to work quickly.
Click below to get in touch with the Gusto team and we’ll be in touch.
