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Asset finance

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If your business needs to upgrade or purchase equipment, asset finance can offer you an affordable way to finance them.

Buying equipment upfront can be costly and leave a dent in your business’ cash flow. Asset finance allows you to secure the equipment, machinery, or vehicles with an affordable upfront payment, repaying the rest over a period which suits you. This method means your business can access the assets needed to grow and expand without such a significant impact on the cash reserves, so you can still meet your outgoing commitments.

After the initial deposit, your business receives the asset and you repay the rest in monthly instalments, plus interest and fees. The asset will act as security for the arrangement’s duration, and if you miss or default the payments, it could be taken back.

Depending on the arrangement, after the repayment period ends you could be allowed to keep the asset, or the finance company may offer you an upgrade for a new arrangement.

Advantages of asset finance

With the right funder, asset finance can offer many benefits to your business.

  • By spreading the costs over several months, your business could afford newer equipment it might not be able to otherwise. Doing so could help your business meet its daily liabilities, while standing out and increasing growth opportunities.
  • If anything goes wrong with the item, the finance company may offer a maintenance service depending on the arrangement. The asset also acts as security in most arrangements without the need for personal guarantees. The interest rates are often fixed too, allowing you to factor the projected outgoings into your costings.
  • The finance agreements’ length is often similar to the asset’s lifespan. Once the arrangement ends, the finance company may offer you an upgrade, or even offer you ownership of the asset.

Considerations of asset finance

While spreading the costs to repay at an affordable rate makes asset finance an attractive process, there are potential drawbacks you should consider.

  • An upfront payment is often required. These deposits vary in size, but could be the equivalent of the monthly payments, or more depending on the arrangement and the lender’s specifics.
  • Cancellation terms may vary depending on the arrangement; there could be a charge for cancelling early, or the contract may roll on once it ends.
  • Your business won’t own the asset until the repayment period ends. Until then, it belongs to the finance company. If you fall behind on the payments, they could repossess the asset from you.
  • The lifespan of the asset will affect how long your business has to repay. If the item has a short lifespan, you won’t have as long to repay the full amount.
asset finance

How could asset finance help you?

Asset finance can be extremely helpful if your business needs to purchase new assets or upgrade old ones, but doesn’t have the capital to do so. The arrangement is ideal for both well-established businesses looking to save on their equipment costs, and for new businesses without the funds to buy assets outright.

There are two main types of asset finance. Hire purchase, which involves a business purchasing an asset and spreading the cost over time, and leasing; where a third party purchases an asset on your business’ behalf to be repaid in instalments.

In summary

Asset finance can be a valuable tool for businesses needing to invest in new equipment, but without the capital to purchase the assets outright. By spreading the cost of the asset over a period of time, the business can gain the assets it needs to stay competitive and stand out. Whether you’re a well-established business, or a start-up looking to set yourself apart from the competition, asset finance could help your business achieve its potential.

How we can help

If your business needs new assets to drive itself forward, but don’t want your cash flow to suffer, speak to us today, and we can explore the options best for you. Our initial advisors provide free, impartial advice with no obligation. We have years of experience in the industry and a strong foothold to negotiate with the funder best suited to your business.

Beverley Horton

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Authored by Richard Froggatt

Richard Froggatt

Senior Consultant

Beverley Horton Christopher Callaghan Stephen Hall

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