What is asset finance?
Asset finance is a type of loan used to fund the tangible things you need to run or grow your business. These assets could include computer systems and software, machinery, equipment or vehicles for example.
Asset finance is a secure means of funding that allows you to pay for the assets in affordable monthly instalments instead of having to make a large, one off payment. For this reason asset finance is an attractive option for small or start-up businesses.
Unlike overdrafts, asset finance is not repayable on demand. Additionally, it is a form of secured loan so lending criteria may be more flexible than a bank loan.
What types of asset finance are there?
There are two main asset finance options available to a business:
The leasing company buys and owns the asset on behalf of your business. Your business pays a rental for use of the asset over a pre-determined period. There are two types of leasing options:
Finance lease – the full value of the equipment is repaid to the leasing company, plus interest, over the lease period.
Operating lease (contract hire) – your business pays for the asset while it is needed. The leasing company may retain responsibility for maintenance and will normally take the asset back at the end of the lease period.
The hire purchase company purchases the asset on behalf of your business. You hire the asset over a fixed period of time in return for regular payments. Once the repayment period of the hire contract is over, your company will have full ownership of the asset.
What are the benefits of asset finance?
- It enables a business to buy new equipment which might be otherwise unaffordable.
- Fixed monthly payments enable a business to budget and improve cash flow.
- Equipment can be leased for a short period if only required for a limited time.
- Finance agreements can often be flexible and tailored to a business’ needs.
- Leasing avoids the issues relating to asset depreciation.
Which asset finance solution is right for my business?
Please call us on 01392 469989 to speak to our team about which asset finance option is right for your business and provide an asset finance quote.