What is Asset Financing?

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Asset Finance provides the equipment you need to make your business work. An Asset Finance Agreement is a flexible alternative to a Bank Loan. Depending on the nature of your business, the assets concerned could be anything from basic office equipment to a fleet of cars or vans or plant or machinery.

THE BENEFITS:

  • Makes your assets work for you

  • Enables procurement of the latest equipment at a reasonable cost

  • Flexible payment terms and period

  • Eligible for Personal Guarantee Insurance to protect all that you have worked for

HIRE PURCHASE

Many asset finance arrangements are hire purchase contracts which give you immediate access to assets that you only own outright after completing a series of payments, for example, over one or two years.

Own your asset and spread the costs. Many people like the idea of owning an asset and this is one way to do it. Hire Purchase - also known as Lease Purchase - gives you the certainty of fixed costs for the duration of the agreement and the option to buy the asset at the end. Hire purchase can be good for your business because it brings exceptional flexibility to your business, and:

  • Puts you in control: you decide whether to buy the asset at the end of the agreement.

  • Flexible payments: you can reduce monthly payments by paying a larger final lump sum, known as a balloon payment.

  • Fixed or variable rates to suit your needs.

  • Reduces your tax payments: you can usually claim 'writing-down' allowances and capital grants. You may also offset repayment interest against your profits and reclaim VAT (special rules apply to cars).

LEASE OPTIONS

The lease enables you to rent the asset but you do not own them at the end of the payment term. In a business situation where innovation means that plant and machinery or even technology changes the way that product is produced might be an example of when a lease option is the most beneficial. The lease can be over the economic life of the asset or for the period for which it is useful to you.

REFINANCING ASSETS

Businesses that already own assets but are struggling financially can also borrow against those items using asset refinancing while continuing to use them. The funder values the assets, buys them at face value from the business and then leases them back to the business.

WHAT ARE THE ADVANTAGES OF ASSET FINANCE?

  • You get access to the latest equipment

  • Most agreements come with fixed interest rates

  • As it is secured against the assets concerned, funding of this kind can prove easier to obtain than a bank loan

  • The fixed payments make it easy to manage your budget

  • If you can’t pay, you only lose the equipment - nothing else

  • The agreements can’t be cancelled as long as you keep up the payments

  • Leasing agreements may include equipment servicing and the option to replace or upgrade equipment at the end of the fixed term

WHAT ARE THE DISADVANTAGES?

The disadvantages of asset financing include:

  • It can be more expensive overall than buying an asset outright

  • You may find it hard to cancel a long-term agreement

  • In many cases, a deposit or advance payment of some kind will be required

  • You can’t deduct the value of equipment funded through asset finance from your profits for tax purposes

 
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