Asset Finance

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Asset Finance

If you are looking to purchase equipment, machinery and vehicles for your business, then asset finance could be a suitable funding option. It can be a great way for a company to obtain new equipment and machinery in an affordable way. Paying for a substantial asset up front can cause issues when it comes to cash flow, while for other companies paying outright is simply not possible. Asset finance allows you to spread the cost while also giving you full use of the item while you are paying for it.

Asset finance sees loans being wholly or largely secured on the assets being financed and gives you the flexibility to fund your equipment purchases while also avoiding paying out a lump sum. As this is a type of secured borrowing, the interest rates and terms offered are often more competitive than those offered on unsecured loans.

Types of Asset Finance

There are four common types of asset finance:

  • Hire purchase – an affordable way of purchasing an expensive piece of equipment. You buy the item that is required and this is funded through a hire purchase company. You will then make regular repayments in order to pay off this balance. Once you have completed the agreed term of repayments, full ownership is passed to you.
  • Operating lease – this is very similar to a hire purchase, but without the element of ownership by you. The finance provider will purchase the equipment you require and lease it to you for an agreed period, again on fixed payment terms. Once the lease period is over, the equipment returns to the finance provider.
  • Finance lease – an option that sits part way between a hire purchase and an operating lease. It initially follows the same format as an operating lease, with an agreed leasing period. However, a finance lease contract gives you greater flexibility when the lease period comes to end. You can return the equipment, negotiate a lease extension, or pay off the balance of the value of the equipment and purchase it outright yourselves.
  • Contract hire – this is a special financing arrangement if you would like to purchase a vehicle for commercial use. The costs are spread over a fixed repayment period during which you are effectively hiring the vehicle. The main difference is that the repayment schedule also often includes a monthly mileage quota, changing how much gets repaid depending on use. This is to factor in the fact that vehicle values alter over time according to mileage.

With a huge variety of different providers and products available, the choice can sometimes be bewildering; you should, therefore, make it a priority to seek expert advice before going ahead. You need to ensure that you know exactly what you are signing up for and to be confident that this meets your needs both now and in the future.

Real Business Finance has close relationships with a wide range of asset finance providers, and we know exactly who to put you in touch with to secure the most appropriate funding option for you and your business. Contact us to learn about your options for obtaining finance and take the next step toward improving your cash position and growing your business.

Neil Jeeves

Partner

0800 182 2358

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