Asset Finance

Asset finance is an important financial product for businesses in the UK.

It is used to protect cashflow when buying new or used assets such as machinery, vehicles, equipment or even smaller items such as technology hardware or software.

Asset financing allows a business to spread the cost of purchase over a longer term and could even offer tax benefits, depending on the finance structure chosen.

In this guide, we break down what asset finance is, what it can be used for and how existing assets can be used to raise funds for a business.

What is asset finance?

Asset finance is a financial product that can be used by businesses to spread the cost of new assets over a longer term, through regular monthly repayments.

It can be used to finance almost any asset, including vans, cars, plant and machinery, IT equipment or aircraft.

This can operate as either a loan secured against the asset or as an equipment leasing or hire purchase agreement.

Asset finance agreements usually allow you to use the item as your own during the term and passes responsibility for the maintenance and servicing on to you.

Some agreements see you own the asset in full at the end of the finance term, some return to the finance provider and some come with a balloon payment.

Why work with ABC Finance?

At ABC Finance, we can offer asset finance for the leading lenders across the entire market and work hard on your behalf to find the best deal.

We work with businesses across the UK to find the perfect deal and can secure you the funding you need to take your business forward, quickly.

What are the advantages of financing your company assets?

The main advantages are:

• Financing equipment purchases may mean you can purchase better equipment than would otherwise be affordable.
• The leasing company will often be responsible for the repair of the machine, should it fail.
• The risk of buying new equipment is reduced as the cost is spread over a period of time.
• The impact on the company’s cash flow is limited as the cost is not paid out as a lump sum.
• Rates are usually fixed, meaning the monthly repayments should stay the same throughout the term.

There are also some disadvantages to consider:

• Depending on the finance terms, a deposit may still be required for some assets.
• Some agreements can have early repayment penalties, should you wish to cancel the agreement early.
• The total cost of buying the asset may work out more expensive than buying it outright

Are there different types of finance available to secure new business assets?

Hire purchase

Hire Purchase (or lease purchase) allows you to spread the cost of your asset over a longer period. Repayments are regular, and you have the option of buying the item at the end of the agreement.

Hire purchase can be beneficial to a business as it negates the need to pay out a lump sum for the purchase of an item. In addition, these agreements tend to benefit from fixed monthly repayments. This can make forecasting financials much more straightforward.

During the contract, you are generally responsible for maintenance costs for the asset. The likely costs of maintenance should be considered on top of the monthly repayments.

Finance lease

The finance lease is designed to give business owners the option of renting an asset for the majority of its predicted life, rather than purchasing it outright. This can be beneficial to cash flow, as new equipment does not have to be paid for upfront.

As it is rented rather than bought, it never appears on your balance sheet, and the rental payments can be offset against profit and VAT.

Operating lease

An operating lease, also known as contract hire, is the most well-known form of leasing. In simple terms, an operating lease is a rental agreement for an item for a pre-agreed term.

Asset refinance

Asset refinance is used to release capital from assets back into the business and is designed to aid cash flow. This allows a business owner to sell their asset to the provider before leasing it back on agreed monthly payments.

The capital released not only provides a boost to the bank balance, but the company still benefit from the use of the asset.

We offer finance for a range of assets

Vehicles

• Cars
• Vans
• Commercial vehicles

Equipment

• Agricultural
• Machinery
• Technology
• Healthcare

Specialist assets

• Renewables
• Aviation
• Marine

What are the alternatives to asset financing?

The alternatives to asset financing are:

• Revolving credit – Revolving credit can mean either a business overdraft or business revolving credit facility, but whichever option you choose, they work in a similar way. This is essentially an extra pot of money that can be used when your business bank account hits zero.
• Business loans – Business loans allow a company to borrow a lump sum and repay it over a fixed term through regular monthly repayments. Unsecured business loans are fast and allow borrowing up to £250,000. For larger sums, consider a secured business loan.
• Invoice finance – Invoice finance, which is made up of two main products, invoice factoring and invoice discounting, allows you to borrow against your sales ledger. It is a form of revolving credit designed to finance a business’s ongoing cash flow requirements.