Asset Finance UK
What is this type of finance?
Asset Finance is a business funding option that provides access to business like equipment, machinery, and vehicles, or helps you release equity from the value that you have in the assets you already own. Asset Finance can include the following services:
Simply put, Asset Finance refers to a broad number of valuable items that exist in your business and the ability to secure credit/finance against similar items of value including machinery, vehicles and other equipment and receive them now, but paying them off over time.
So how do you use this type of finance to get new equipment?
Many businesses looking to grow often can’t commit to huge outlays upfront for the vital bits of kit they need.
When a business is in its infancy shelling out for expensive kit all in one go could be a cash-flow disaster.
Thankfully, one aspect of asset finance helps businesses get the valuable kit and equipment they need, without huge outlays all in one go.
Ease the burden. Spread the cost over an agreed period of time as this will help company finances considerably.
how can it help
Equipment Leasing is where a lender will purchase the equipment your business needs, and then they will lease it to your company for an agreed rate for an agreed period of time. The benefit of leasing equipment is that your business can have it straight away and only need a small portion of the money ‘up-front.’ In most cases, you need to pay one month’s instalment up front but you can spread the VAT over the term and at the end of the term you have several options to help your business.
You can either buy the kit at a reduced rate as the final purchase cost will take into account the money you have paid up until that point, or you can upgrade to the new kit on a new lease. Many fleets of vehicles are managed in this way but this is only one example of equipment leasing in practice. Lots of businesses find that asset finance is a very efficient way to support their business.
Let’s say (keeping the fleet vehicle analogy in-mind) that you have leased a truck for a period of time and towards the end of the agreement business is good, well in this instance you could consider a larger truck, or re-negotiate several smaller ones on a package Equipment Lease deal.
What is asset refinancing?
Your business may own or have shares in assets that hold value. If you are trying to raise finance quickly there are funding options that will let you secure the loan against assets you already hold, thus releasing the value embedded within them to be used by your company.
Finance Leasing, what’s that and how does it work?
A Capital Lease or Finance Lease as they’re commonly known is an avenue of business funding that falls somewhere in-between equipment leasing and hire-purchase. Finance Leases and Capital Leases are generally longer-term options which will cover the majority of the equipment’s life. Finance leases are tax efficient as you can get full use of the asset now, and pay the equipment off over the term of the agreement.
Having said that, it won’t appear on your balance sheet as a tangible ‘owned asset’ so it is, therefore, possible to offset the rental costs against profit and claim the VAT – which can be tax efficient depending on your businesses circumstances.
How can hire purchase help my business?
Most people understand the benefits of spreading costs over an agreed period. Hire Purchase is an easy way to acquire an asset and pay it off over time, helping to maximise your companies’ cash-flow. Unlike Finance Leasing, Hire Purchase agreements DO appear on your balance sheet and will need to maintain the product and ensure it is insured as technically, it’s yours – you own it from the get-go.
Moreover, at the end of the term, you own the asset outright.
What are operating leases and contract Hire?
Contract hire and operating leases are a very common way of leasing equipment. The benefits of operating leases are that they like rental agreements but with a set term and unlike with Hire Purchase any maintenance and repairs will be looked after by the company lending you the equipment (Lessor).
If you’re a business looking for finance and are interested to find out how asset finance can help your business, please call one of our specialist advisors now, they will be happy to help you.