Asset Finance Explained – Your FAQs
What is asset finance?
Asset finance is a broad category that refers to leasing assets or equipment in exchange for pre-agreed regular payments – supplied and organised by an external provider. The assets or equipment in question can vary from delivery vehicles to catering equipment. There is virtually no limit as to what equipment can be leased from a specialist provider, as most asset finance specialists will cater to the needs of their customers.
How does equipment leasing work?
On a very basic level, you select the asset you require, the leasing company pays for it and rents it to you according to a pre-agreed lease. This means that you will have access to the equipment you require straight away, without having to pay a large lump sum up front that could affect your cash flow.
What types of equipment are available with asset finance?
With the right provider, you can have access to any equipment you require for the development of your business. Industries that use asset finance to their advantage include, but are not limited to; agriculture, transportation, green energy, manufacturing, waste disposal, retail, medical and a wide range of organisations that require vehicle fleets.
What different types of asset finance agreements are available?
When it comes to deciding on the right type of finance agreement for your business, you should consider the pros and cons of all options. Your options will include; a hire purchase agreement, a finance lease, an operating lease, or contract hire. Each of these finance options vary slightly. For example, a hire purchase agreement will give you the option of buying the asset at the end of the agreement, whereas a finance lease is solely a rental agreement, meaning you will not have the option of purchasing the asset at the end of the agreement. Discuss your requirements in detail with your asset finance provider to ensure you’re choosing the right type of finance agreement for your business and the equipment you require.
Benefits of asset finance
What are the benefits of asset based lending?
Leasing business equipment is useful for organisations who do not want to release large amounts of capital up front. Asset finance leaves them with the option to only release a fraction of the amount they would have to pay if they were buying equipment outright. At the end of the contract, depending on the type of financing agreement selected, you may also have the option of continuing to lease the equipment, buy the equipment at an agreed price, or you may have the option to upgrade the equipment to a newer, more efficient model. Alternatively, you could return the asset if it is no longer required.
How flexible can the asset finance agreement really be?
The flexibility of asset finance offers businesses, especially SMEs looking to invest in future endeavours, the opportunity to improve on performance and efficiency by investing in new equipment without financial risk. It also means that you can benefit from brand new equipment, spreading the cost of it at regular intervals, and the potential for flexibility at the end of the agreement. For example, if your business has seen significant growth over the period of your lease agreement, you can then upgrade to a larger vehicle, more equipment, or simply a newer model.
How can asset finance help my business grow?
When choosing a lease agreement, you are given the benefit of being able to invest in business equipment to support business growth and expansion which the business might not otherwise be able to afford. Asset finance offers an attractive alternative to tying up valuable capital which could be better used in other ways. And it helps smooth and improve cash-flow.
Having access to new equipment may allow the business to expand, develop new services or become more efficient.
Need further advice on how leasing business equipment could work for you? Contact our team of experts today to see if we can help your business grow.