Is your business growing faster than you expected? Are you struggling to meet the needs of your customers due to lack of machinery or vehicles? Do you need funds to upgrade your current equipment or replace broken down machinery? If yes, asset finance could be the perfect solution.
Asset finance is a type of loan for companies that need business assets such as machinery, equipment and vehicle. You can also use asset finance to release cash from the value of assets you own.
It’s a way to raise the funds you need to purchase new equipment when you’re stretched for cash.
The finance can only be used to buy or lease assets that help you take your business forward. The asset finance company is the financial institution or lender that provides financing for physical assets.
Assets could be anything from vehicles, power generators, material handling equipment, tractors, office equipment and machinery.
This is the most common type of asset finance. Hire purchase finance gives you immediate access to equipment and other assets. You own the asset after you’ve completed payment in installments.
Think of it as a deposit for a home. You pay 10% - 20% of the asset’s value upfront plus VAT. The rest of the finance is spread out over a defined period.
You do not require any collateral to secure a hire purchase loan. When you’ve completed payment the asset belongs to you. Finance charges are also tax-deductible.Equipment Leasing
You access funds to lease assets but do not own them at the end of the agreement. The leasing agreement involves the lender buying assets and leasing them to you for a fixed monthly sum.
You have access to the assets without using up your capital or visibly borrowing money.Asset Refinance
Depending on the context, asset refinancing could refer to combining asset finance with another finance. It also involves using a business asset as security for a loan or to refinance business debt.Capital Lease
Also known as a finance lease, it’s similar to equipment lease and hire purchase. A capital lease is a long-term lease where you use the asset for its lifespan. Technically, you don’t own the asset but pay the full amount over time.
A deposit is not required. However, you’ll be tied in for a pre-determined timeframe. Monthly payments enable you to avoid the high cost of a one-off payment to purchase the asset as a whole.
The funder buys the asset. The asset becomes the security for the financing. You pay monthly instalments to use or own the asset depending on if you took out a leasing agreement or a hire purchase.
Repayments are spread out to fit what works best for you. It could be between one to five years. Some lenders could let you borrow for longer. Payment plans can also be tailored for small businesses who have unique needs.