What is Asset Finance?
Asset Finance allows a business to spread the cost of capital equipment and high-cost assets over the useful life of the asset, rather than paying the full amount on purchase.
Whether you are looking at a new company asset to increase efficiency, increase capacity, increase profitability, or whether you are investing in new equipment to portray the right image or maintain your competitive advantage, Asset Finance enables you to fund the purchase and pay for it over its useful life (to fund working capital check invoice finance).
How does Asset Financing work?
Several different types of asset finance have different advantages & disadvantages - and can be utilised in different situations depending on the circumstances/priorities of your business.
Broadly, the different variations are below.
Hire Purchase (or Lease Purchase)
Works in a similar way to personal HP where the HP company retains title to the asset and leases it to the company for a regular fixed payment. The business can choose to purchase the asset at the end of the agreement for further payment.
Finance Lease (Or Capital Lease)
This is different from many other forms of Asset finance as the business only ever rents the asset. The business will not have the right to purchase the asset at the end of the agreement but will sometimes share in the sale proceeds on the sale of the asset.
Equipment Leasing
Similar to Finance Lease. A lender will buy the equipment and will rent to the business for a fixed period/cost. At the end of the agreement, the business can choose to extend the lease, upgrade the eqpt, agree on a price to buy, or just return the asset
Maintenance & servicing costs are covered by the provider Making this a simple/clear option for a business.
Operating Lease
Similar to Equipment Lease but tends to be the larger kit that the business may not need for the useful life of the equipment or that they have no interest/need to own long-term. This type of facility allows a business to effectively rent the equipment over a short or medium-term with rentals based on how long it is needed. The clear advantage being significantly lower capital cost and risk compared to buying the kit.
Who uses Asset Finance?
A wide variety of companies can take advantage of asset finance but the most common industries include:
Construction - Logistics - Manufacturing - Engineering - Printing - Packaging - Recruitment - Security - Transport - Wholesale - Distribution - Professional Services
Advantages of Asset Finance
Asset Finance spreads the cost into affordable payments meaning you can make an investment decision quicker or retain cash in the business.
Payments are fixed and can take into account seasonality meaning it is easy to budget and build into cash flow.
Where the value in the asset is high, the equipment acts as security for the facility
If Leasing or hiring, then the servicing and maintenance packages are included.
Asset Finance is often a more cost-effective way of financing than alternatives of bank loan/overdraft.
Depending on the type of facility, the depreciation risk and failure risk of the asset sit with the lender.
Facilities can be agreed and paid out in days
Asset Finance FAQ
Who is asset finance good for?
Asset Finance is appropriate for all kinds of businesses large and small.
What security will be required?
This will vary depending on the type of asset. Assets with a high residual value will be the main security for a facility - for soft assets where the residual or resale value is limited, then another form of security may be required.
Can second-hand Assets be purchased?
Lenders understand the benefits of purchasing used assets and will mainly be interested in understanding the current and likely future value of the asset and also that it is likely to remain fit for purpose for at least the length of the agreement.
The Process
From initial inquiry to successful implementation can be completed comfortably within 2-3 days (potentially quicker if needed). There are a few pieces of key information needed to review and underwrite and we will work with you to complete the request within your desired timeframe.
Free Quote
To enable us to get you a free quote we would need the following
A copy of your most recent set of filed accounts
An up to date Aged Debtors Report
If you have an existing facility, please provide the last 12 months statements from your current provider.