What is Asset Finance?
Asset finance definition: “the purchase of equipment (or things of a similar high cost) for a business. This type of finance is used by organisations who have the need or the opportunity to grow their business but perhaps may not have the funds readily to hand or prefer to spread the cost over a longer term. Where a business requires the purchase of a new physical asset the finance company will pay for the equipment, plant, vehicle or machinery and the client will pay a regular sum to the provider.” (Source: MoneyFacts)
As a leading UK finance broker, we’ve got you covered in all things asset financing.
Asset financing solutions can be used to fund any asset purchase that your business may make. This ranges from plant machinery and performance vehicles, right the way through to IT equipment. If it is not more land or new buildings (see our property finance section), then asset financing can be used to fund equipment that your business may require for growth.
To put it simply, asset financing is anything that isn’t bricks and mortar. As a leading corporate finance institute, we are more than perfectly situated to provide you and your business with expert advice and funding when you need it.
If you opt for asset refinancing, you can release equity in wholly or partly unencumbered assets. This can provide a much-needed injection of capital into your business, without affecting your existing banking relationships.
When to use Asset Financing:
Asset finance just might be the catalyst to business growth that you have been searching for!
Do you need new IT equipment for your ever-expanding team? Then you need asset finance. Need a new fleet of vehicles to help process a sudden increase in orders? You need asset finance. Need new plant or machinery to replace the antiquated machinery you’ve been using for years? You need asset finance.
As you can probably tell, asset financing is most useful when you need new physical equipment or goods to help your business grow and thrive. We have whole market access to the best handpicked asset-based lenders for your requirements. Please don’t hesitate to get in touch with your asset financing queries!
How does Asset Finance Work?
Let’s say you take out a loan to buy new equipment for your business. You’ll probably buy the equipment outright before using any profits generated by your growth to pay off the loan.
Asset financing is different. It involves leasing equipment from a specialist company, who’ll buy and own the equipment on your behalf. You’ll then proceed to pay a rental for the use of this equipment over a predetermined period.
This is significantly more affordable than buying the equipment outright, and considerably less risky than taking out a business loan to fund the purchase of new equipment. Asset financing is therefore a viable option for businesses in need of funding for growth.
Benefits of Asset Financing:
- Quick access to equipment that would have otherwise been unaffordable
- Because you’re not making an outright purchase, you can invest in new equipment without damaging your cash flow
- The financial agreement can be tailored to suit your unique business requirements in terms of both duration and repayment
- As repayments on both leasing and hire purchase agreements are usually fixed, you can manage your cash flow with ease
- It releases working capital
- It can be totally independent of your existing lines of funds
- A simple application process
- A wide range of flexible options can be incorporated, for instance low initial monthly repayments until revenue generated from the asset comes online
What type of assets can I finance and refinance?
There are a number of assets you can finance and refinance to release funding, including but not limited to:
- Plant and machinery
- Light commercial vehicles
- Buses and coaches
- Agricultural equipment
- Aviation and marine
- IT equipment
Asset finance and refinancing can be provided for both new and used assets and for a wide range of machinery and equipment that is needed to operate your business.
Asset Finance Solutions:
Broadly speaking the two most common types of asset finance are leasing and hire purchase.
If you choose to lease you have two further options. With a finance lease the value of your new asset will appear on your business’s balance sheet. The rental payments will then pass through your profit and loss account which means that the full value of the equipment will be repaid to the leasing company, with interest over the course of the pre-agreed leasing period.
But some businesses only need equipment on a temporary basis. In which case an operating lease might be your best bet. Payments will still appear in your business’s profit and loss account, but they’ll only be made to the leasing company for as long as you’re using the equipment. Furthermore, the leasing company will likely remain responsible for maintaining the equipment and they’ll often take the equipment back at the end of the leasing period. And crucially, because you’ll only keep the equipment for a set amount of time it will not appear on your balance sheet.
Finally, hire purchase is the way forward for businesses that eventually wish to own their new equipment outright. With a hire purchase agreement, a finance company will purchase the equipment on your behalf. They’ll then own the equipment right up until the final instalment is paid. After this you’ll have the chance to buy the asset for a nominal sum.
Why choose Goodman Corporate Finance?
Many funders offer asset-based lending solutions, so why choose us?
We are proudly a “solution over commission” focused finance broker who will manage the whole deal for you, from the moment you make the enquiry right up to the point where the funds have been released. This handheld, ‘cradle to grave’ service sets us apart from our competitors by a mile.
We approach every new opportunity with ‘a blank sheet of paper’, offering several solutions for you to choose from. No business is too small for us to help, whether you’re a small start-up or a large, established PLC, you will always get the same gold standard service. This unique approach means that you can choose the right solution for your situation and enable your business to flourish.