Without asset finance, many companies wouldn’t be able to afford to invest in new machinery or take advantage of market opportunities without the cash in the bank. According to the Finance & Leasing Association, in 2016 £30 billion was provided to businesses and the public sector representing almost a third of UK total investment in machinery, equipment and software.
How does it work?
Asset finance is a very versatile option for businesses which require expensive machinery, have large maintenance expenses or have major capital costs to consider. It can help organisations spread the cost of an expensive piece of equipment, or used to free up cash in existing assets to be used elsewhere in the business.
Most businesses just don’t have the money available in their cash flow to make much-need capital purchases. So how do these companies continue to grow and stay ahead of the competition if they can’t afford to make important investments in equipment? They trust asset finance and spread the cost, so they can enjoy the benefits of the new purchase straight away without having the upfront expense.
Asset finance is extremely flexible, so there is usually a solution that works for every business. From new computers to fixing a tractor, the funds can be used on any capital purchases and paid back in manageable instalments. Here are some examples of the different types of asset finance:
Hire or Lease Purchase
Think of this form of finance as similar to buying a car. It’s a great option if you want to own your asset at the end of the term, and offers flexible repayment options. When buying a car on finance you have the option of giving it back at the end of the agreement, or paying a little more each month so the car is yours. With hire or lease purchase you will own the asset once it is paid off.
This is like renting a piece of equipment long term, which can have benefits. For example, at the end of the agreed period the asset it sold and you’ll receive most of the profits. This could be a viable option for machinery or equipment which doesn’t have a long lifespan or you won’t require after a few years.
Sale and Leaseback
Allows businesses to effectively sell off their assets and lease them back. It allows cash to be unlocked from assets, such as a vehicle fleet, to be used for other expenses where it is needed.
The type of asset finance you choose will depend on what you need to invest in. If you’d like to find out more about flexible asset finance speak to one of our advisors today.