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Need new IT equipment for your ever-expanding team? 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.

In short, so long as it’s not more land or new buildings, asset financing can be used to fund whatever equipment your business needs to grow – whether that’s a photocopier, a tractor, or even aircraft.

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 finance 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 renal for the use of this equipment over a predetermined period of time.

This is significantly more affordable than buying the equipment outright, and significantly less risky than taking out a business loan to fund the purchase of new equipment.

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 installment is paid. After this you’ll have the chance to buy the asset for a nominal sum.

The Benefits of Asset Finance Solutions

The obvious benefit of asset finance is that it gives your business quick access to equipment that might otherwise have been in-affordable. But beyond this:

  • 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

So if you know precisely what equipment your business needs to grow but an outright purchase is beyond your current means, asset finance might be exactly the solution you’re looking for.

Click here to read about our asset finance service, and for a free consultation with one of our expert corporate finance specialists, give us a call on 0333 3583502.