What is asset finance?
Assets are usually valuable, physical items that vital to the running of your business, such as vehicles or computer equipment. Asset finance is the way the businesses finance paying for such large value items without exhausting cashflow.
There are two types of assets. Hard assets are usually high value items including premises, plant, equipment and vehicles, hard assets retain a saleable value beyond the term of your finance agreement. Soft assets are expected to have little or no saleable value at the end of the finance term and include items such as IT hardware, software, CCTV and office furniture. Asset finance covers the way that you pay for these physical assets upon purchase, or loans against current assets known as asset refinance. With flexible options due to the security for the lender of having a physical item to lend against asset, finance is accessible too many businesses. We may be able to arrange bespoke payment plans including seasonal payment structures and balloon payments if required.
Types Of Asset Financing Available
- Hire Purchase – spread the cost over a set period of time and own the asset after the final payment is made
- Equipment Leasing – the equipment is purchased by the lender and your business leases it for a set period of time. At the end of the lease you do not own the item but have the option to return it, continue leasing it or purchase it for an agreed cost
- Finance/Capital Leasing – equipment is paid for in full over the course of the lease period but is not technically owned by your business allowing you to offset rental costs
- Operating Leases – equipment is leased by your business and maintenance costs are paid for by the lender, the equipment is not owned by your business allowing you to offset costs and you do not pay the full purchase price making it a cheaper option
- Asset Refinance – Borrowing against items already owned by your business such as property. This allows you to free up cash for immediate business use.
For a more in-depth look at the types of asset finance available head over to our blog where will find an array of information and regularly posted articles on the topic.
Benefits of Asset finance
Purchasing high-ticket essentials for your business can be a drain on cashflow; this is where asset financing comes in. With deals available for large and small purchases asset finance can be used to purchase a £1,000 computer or a £10million piece of machinery. There are many benefits of utilising this type of finance as listed below:
- Low deposit
- Fixed payments makes budgeting easier
- Spread the cost of large purchases to improve cashflow management
- Loan secured against the item being purchased often meaning this type of loan is suitable even with a sub-optimal credit history
- Where applicable maintenance and service costs can be included in lease deals to further help manage the stability of your cashflow
- Risk of depreciation may be taken away from you and onto the loan provider
- Often interest rates of lower with asset finance than other sources of business lending
- Potential tax advantages