1. What is Asset Finance?
Asset finance allows businesses to grow by purchasing new vehicles and machinery without paying the full amount up-front. There can be many reasons to consider asset finance, from replacing old machinery and upgrading your fleet to investing in new equipment to expand operations and chase growth; the flexibility of asset finance is perfect to help fund these purchases.
There are three main types of asset finance options you can consider:
a) Hire
Hiring is essentially renting an asset for a fixed period and paying regular fees to borrow the equipment. Because the ownership remains with the finance company, it's ideal for businesses that need short-term access to tools or vehicles without the commitment of ownership.
b) Hire Purchase
With a hire purchase, you pay for the asset over time through fixed monthly payments. Unlike hire agreements, you own the asset at the end of the term once all payments have been made. This is a popular option for businesses looking to eventually own the equipment without paying the full amount upfront. By having a hire purchase agreement, your business can claim tax relief on the interest as well as the capital allowance.
c) Leasing
Leasing allows you to rent the asset for an agreed period, typically with a deposit less than a hire purchase agreement. At the end of the lease, you can either return the asset, extend the lease into a secondary rental (a further lease agreement over 12 months at a much cheaper rate than the original), or purchase the title of the asset at a reduced rate. Leasing works well if you prefer flexibility and want to upgrade your equipment regularly.
2. Benefits of Asset Finance for Your Business
There are many advantages to asset finance; here are the most prominent few:
a) Cash Flow Management
Asset finance helps businesses manage cash flow by spreading out the cost of large purchases over time. Instead of a lump sum, you can make manageable monthly payments, preserving your working capital for day-to-day expenses or unexpected needs.
b) Business Expansion
Whether adding new vehicles to your fleet or upgrading worn machinery/equipment, asset finance can fuel business growth without putting undue strain on your finances. You can invest in the resources you need to expand operations, take on new projects, or increase production, all while maintaining a healthy cash flow.
c) Releasing Equity
If you already own valuable assets, asset finance allows you to unlock equity tied up in those assets. This can give you a much-needed injection of cash, which can be reinvested into other business areas or used to ease cash flow pressures. You retain the use of the asset through the sale and hire/hire purchase/leaseback facilities while benefiting from the capital it represents.
Conclusion
Asset finance offers a flexible, accessible way for businesses to acquire and manage the equipment they need for growth. Whether you're looking to hire, hire purchase, or lease, understanding these options can help you make smarter financial decisions for your business.
Asset finance can be a key tool in helping your business reach its full potential by managing cash flow, supporting expansion, and even unlocking equity.
Call to Action:
"Interested in exploring asset finance options for your business? Contact us today to find out how we can help you make the right choice."
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