Asset Finance Business Funding
Is a vital piece of equipment, machinery, technology or a vehicle your business relies on no longer fit for the job? Perhaps your business is ready to grow and you need to invest in new assets to expand and make growth possible.
Asset finance gives you access to these assets without the need to pay large sums up front, the cost is instead paid back over time in regular agreed fixed amounts.
The key benefit of this type of business funding is the access it gives you to expensive assets, allowing you to grow your business and manage cashflow more efficiently.
As with all types of business funding, there are various pros and cons to asset finance you’ll need to consider:
Advantages of Asset Finance
- You can get access to expensive assets quickly without causing cash flow issues.
- In some circumstances, asset finance may be more tax efficient than buying outright; this is due to the fact that it’s classed as a regular business expense rather than an asset you own.
- Asset finance is paid back in agreed fixed amounts, enabling for easier management and distribution of budgets.
- Because the asset is effectively the security on the loan, lenders rarely ask for personal guarantees such as properties.
Disadvantages of Asset Finance
- As with every type of finance, you will pay interest on what you borrow meaning over the duration of the arrangement, you will pay more than the value of the asset.
- You are likely to need a deposit to secure the funding – you’ll also usually need to cover VAT on the purchase up front.
- If you fail to make the agreed payments, you will lose the asset.
What Is Asset Finance?
Asset finance is a form of business funding that is primarily (but not exclusively) used by SMEs looking to expand and start-ups looking to invest in the tools needed to get their business moving. There are two main types of asset finance: hire purchase and leasing.
Common types of assets purchased via asset finance include warehouse racking and equipment, plant machinery, vehicles and IT equipment but can be used for just about anything with the lender’s approval.
What’s the Process of Receiving Asset Finance Funding?
The most common type of asset finance is ‘hire purchase’, this works in the same way a bank loan would – the business applies for the funding it needs to cover the assets required, the provider sets the level of interest and repayment term, once agreed, the funds are granted for purchase of the asset. At the end of the agreed period, the business will own the asset outright.
The other type of asset finance is ‘leasing’, in these situations, the lender owns the asset and leases it out to the business over an agreed period time; the lender may provide some assurances such as a guarantee or regular servicing on the asset.
Similar to leasing a vehicle, at the end of the agreed period, the company will not own the vehicle and will instead be offered a new lease or given the option to purchase the asset from the lender.
Both these types of asset finance hold different benefits which may suit your business needs better than the other. When using Business Funding Shop as your trusted provider, we’ll talk you through the funding options available be with you every step of the way to ensure you get the funds you need.
Asset Finance – FAQs
Even if you have the capital to front the cost of new assets, asset finance can be beneficial as it gives you more money to spend on other areas of the business.
Yes, like any other form of business funding, you will pay interest on the amount borrowed. This will mean you pay more for the equipment is worth over the lifetime of the agreement.
In most cases, the business is completely responsible for the ongoing maintenance of the asset. This means that should it break down unexpectedly, the business will need to pay for the repair. As mentioned above, leasing sometimes includes repairs, a guarantee or service plan.
Absolutely, start-ups regularly use asset finance to purchase the tools they need to get their business up and running.
Sure, asset finance can be used by businesses of any size. From sole traders to large public companies.
Generally, when using hire purchase asset funding you will be looking at a deposit of around 10 – 20% of the asset’s value.
Asset Finance for Ambitious Businesses
Whether you are in your startup phase, are an ambitious business looking to grow or an established business seeking expansion and cash flow security – asset finance can help.
For more information on asset finance and other types of funding available for your business, give one of our friendly team a call today on 0800 047 2389 or fill out a contact form and we’ll get back to you.