Asset Financing is a broad category that refers to the use of a company’s balance sheet assets, including short-term investments, inventory, and accounts receivable, to borrow money or get a loan.
Principally there are 3 types of Asset Finance available to businesses. These include Hire Purchase, Finance Lease and Operating Lease, although there are also several other types of more specialised asset finance available.
An ”asset” can be almost anything, whether it’s ovens and refrigeration for a catering company or a haulage firm’s fleet of vehicles – and with a wide choice of alternative lenders across the market, you can find Asset Financing for almost anything.
Who is Asset Financing For?
Asset finance is relevant for any business structure – Limited Companies, Sole Traders, Limited Partnerships, of any size.
It’s is also used by businesses that are unable to raise the funding needed to purchase such equipment outright or would like to spread the cost of the equipment (asset) over its usable life.
Similar to a lease agreement however, you are the purchaser and there is therefore a promise of ownership for the goods.
After all payments have been made, your business becomes the owner of the equipment, either automatically or on payment of a final option to purchase fee.
With rates from 2.5%, business equipment refinance allows you to release locked in equity from your assets.
This is available across a number of sectors and equipment types. These unlocked funds can then be used as you require, from consolidating existing finance, growing your existing business or purchasing another.
Many financial organisations will only provide asset finance for traditional hard assets.
We are able to access funding a traditional hard asset, such as heavy plant machinery, tractors, vehicles and fork lifts to more ‘soft’ assets such as gym equipment, IT software and office furniture.
Check to see what’s possible
There is no impact on your personal or business credit rating when checking eligibility
Hire Purchase is a simple way to purchase an asset and spread the cost over time. You pay in instalments, which means the item appears on your balance sheet as both an asset and a liability, with the leasing cost shown as an expense of the business and passed through the Profit & Loss account.
Because you do not own the asset, you will be responsible for maintenance and insurance costs – but you will have full ownership of the item after the term ends.
A Hire Purchase agreement typically allows a business to structure the payments flexibly to maximise cash flow.
The lender buys the asset you need and rents it to you on a lease. That means you have it straight away, and only need to pay a fraction of the total amount up front. Generally, you must pay the first month’s rent, spreading the VAT over the whole period.
Equipment Leasing differs to Hire Purchase as you are responsible for insuring and maintaining the asset.
At the end of the lease, you can either continue leasing the item, buy it outright at an agreed price (factoring in money already spent), upgrade to a new piece of equipment on a new lease, or simply return it.
Many businesses find leasing a good arrangement because as well as spreading the cost over time, you can adapt to your company’s situation.
There are principally no assets that are legal and owned and or operated through any commercial entity that can’t be funded through and Asset Purchases
Most businesses throughout the UK have some form of Asset Finance, for example, leasing a photocopier. This is often based on a leasing arrangement or a Hire Purchase agreement
It’s a specific way to free up cash flow and retain your core capital.
Better cash flow for your business
Has the ability be tax efficient
Enables you to grow your business
An additional source of funding for your business
Reduces the issue of selling off out of date equipment
All your businesses will have up to date assets without an impacting your capital.
Operating leases, or contract hire as they occasionally known, are a more familiar form of equipment leasing.
An Operating Lease is basically a rental agreement with a set term, and maintenance will normally be handled by the lease company (or “lessor”).
Like finance leases, an operating lease will not appear on your balance sheet (which might confer some tax benefits), but operating leases can be cheaper because you do not pay for the full value of the item.
Asset Refinancing is the process of securing a loan against valuable items that your business owns, eg; buildings, vehicles, or equipment. It is a simple idea – if you cannot keep up payments on the loan, the lender takes the asset to recoup what is owed.
Because you are effectively “unlocking” cash, the amount you can borrow depends on the value of the assets involved. Asset-backed lending is sometimes used for debt consolidation.
Some lenders specialise in one area of asset refinance, while others can finance almost anything that has a resale value.
There is a wide range of Asset Finance products available and it can be a very flexible arrangement. However, there are a few restrictions; usually the asset must be critical to your operations, and it must also be removable so it can be taken as security for the loan.
Asset Financing Key Facts
Key features of Asset Financing and the benefits you can get working with the leading alternative business finance providers.
- Funding in full for the assets you need
- Designed for all businesses and or types
- Help you to retain larger sums of cash in your business
- Easy to achieve for your business
- Enables you to shop around for the best deals
- Inexpensive way to increase the capital in your business.
- Speed: Short time frames, can gain funds the the same day
- Control: You choose the value and the terms to suit
- Personal: Often the funding is secured on the asset not you
- Convenience: Easy to achieve with no complicated paperwork
- Security: Enables you to secure your cash in your business for working capital
- Confidentiality: Does not affect personal credit ratings when funded through a limited business.