Asset Finance

Asset finance can support your working capital needs by essentially giving you access to assets which can help your business grow or refinance your existing assets so you have funds to reinvest.

Almost any type of asset can be applied for through asset finance facilities. Tangible assets include machinery, equipment, vehicles, furniture, computer systems and more. In the case of financing equipment for example, lease or hire purchase contracts would accept assets worth £5,000 or more. Intangible assets are those that you can’t physically touch but still have a great value to your business. Your brand identity, list of customers and in-house tech or systems all count as intangible and valuable assets. These can be used for refinancing and you can read more about that here.

The main asset finance options:

Hire Purchase/Lease Purchase

Instead of paying thousands of pounds in an upfront lump sum, hire purchase provides the option to spread the cost of the asset’s value over an agreed time period (including some additional interest). Once the contracted final instalment is paid, you have a few options: you can refinance the remaining amount in a new agreement or make a balloon payment of the remainder. You will then become the full owner of the asset, but also bear in mind that while the finance agreement is still ongoing you are responsible for any repairs or insurance that it may require.

Advantages include:

• Structured payment instalments

Spreading the cost over time means you can access the asset you need more quickly whilst alleviating any cash flow pressures. Certain agreements will allow your repayment amounts to be adjusted in line with seasonality and to ease your budgeting further, fixed and variable rate options are available with certain repayment structures.

• Full ownership potential

Once the agreed contract period is satisfactorily reached, the title of the asset is passed to your business.

Finance Leasing

This product is appropriate if you have no intention for asset ownership once the agreement is reached. Assets can be used in line with a contract involving agreed rental payments plus VAT for an agreed period of time.

Advantages include:

• Full use without ownership

The finance lease arrangement’s rental nature means you will get to use the asset fully without the lump sum upfront investment.

• VAT benefits

The business renting the asset can offset net VAT rentals against taxable profits and in some cases reclaim part or all of the VAT.

• Flexibility for your needs

At the end of the lease you can continue under terms of a secondary agreement, return the asset or upgrade to a new asset on a new lease.

What is the suitability?

Deciding which of these options suits your business better is really only dependent on how you’d prefer to pay. If you’d prefer lower instalments with the option of a larger end balloon payment, then hire purchase is more suitable. To avoid higher upfront payments, go for finance leasing instead.

Asset refinancing

Another option you can consider is refinancing assets that you already own. They likely are tying up capital that you can use to inject more usability into your cash flow. This is similar to a secured loan where assets are used as security against a loan amount.

For more information, read our refinancing guide here.

Get in touch

Want to get more information about asset financing or on how to improve your cash flow? Our consultants are experts in understanding businesses of all sizes within all sectors and can help you to identify suitable options for funding. Fill in our form or give us a call to chat about your business.