Asset Finance is a flexible, convenient way of buying or leasing the assets you need for your business.
Asset Finance Guide
What Is Asset Finance?
Asset Finance can help you buy or lease machinery, vehicles and other equipment for your business without using your cash.
There are also finance products where you can raise capital on assets you already own.
Some forms of asset finance give you the option of owning the asset at the end of the finance term, such as a Hire Purchase or Lease Purchase. Other types of asset finance are Lease Agreements, where you don’t take ownership when the finance agreement is finished.
How Does Asset Finance Work?
Asset Finance is an alternative to your business having to pay for an asset outright. The finance agreement is spread over an agreed term with your business paying monthly instalments.
Most businesses like to have the most up to date equipment and machinery but it can be extremely costly and buying everything needed outright could have a big impact on cashflow. No matter what industry you work in from printing and logistics to manufacturing and construction, asset lenders will help you get the equipment your business needs.
A deposit is needed at the start and the balance of the asset purchase price is spread over the agreement. There are a few different types of asset finance, which have different outcomes at the end of the term. With Hire Purchase and Lease Purchase, you will own the asset at the end of the agreement whereas with a Finance Lease or Operating Lease you don’t.
Using asset finance, businesses are able to make the cost of buying equipment much more affordable than using cash.
If you or your business already own assets but want to release some capital to invest in your business, there are asset refinance options available.
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No matter what sort of asset you want, whether it is commercial equipment, a vehicle or machinery it’s up to you do decide what type of asset finance is best for your business circumstances.
There are tax implications to consider, your accountant can help you with this, and whether you want to own the asset at the end of your agreement or be able to hand it back.
What Different Types Of Asset Finance Are There?
The most common forms of asset finance are – Hire Purchase, Finance Lease, Operating Lease and Lease Purchase.
Hire Purchase (HP) is very commonly used to buy vehicles and is the simplest and most well known type of asset finance.
You pay a deposit at the start and the rest of the purchase price is split into monthly instalments. At the end of the term, after you have made the last monthly payment, you will own the vehicle, or equipment, outright.
A Lease Purchase is similar to a Hire Purchase in that you will take ownership of the asset at the end of the term.
At the start the VAT has to be paid, you would then have a set amount of monthly payments to make, with a final balloon payment at the end. The size of the balloon payment will be determined by the residual value of the asset, making assumptions on condition etc at the end of the term.
By paying a larger deposit, or having a bigger balloon payment you can keep the cost of the monthly payments down.
At the end of the agreement the buyer can:
Sell the asset to pay for the balloon payment.
Part exchange the asset for a newer model.
Pay off the balloon payment and take ownership of the asset.
The risk for the borrower is the balloon payment is higher than the asset is worth. There are companies who will refinance the balloon payment to spread the cost over a longer term, making it more affordable.
With a Finance Lease you don’t take ownership of the asset at the end of the payment term, the lessor (asset finance company) remains the legal owner and is effectively hiring it out.
The full value of the asset is covered by the monthly payments and the borrower is committed to paying all the instalments. Payments can be higher than other finance options as they make up the total value of the asset. However, when the asset is sold you would receive the majority of the sale proceeds, often 95%.
At the end of the agreement there are three options:
Hand the asset back to the finance company who will sell it and give you back most of the sale proceeds.
Your business can sell the asset on to a third party and, again, you will retain the majority of the sales proceeds.
Take out a secondary lease period at a peppercorn rent. This can carry on indefinitely, coming to an end when the asset is sold. The peppercorn rent is commonly an additional months interest per year.
It is in your interests to look after the asset as well as you can, as it will mean it has a higher value when it is time for it to be sold.
It is common for the asset to appear on your balance sheet as the agreement transfers the risk of ownership to your business.
The sort of asset you are buying will be a factor in determining if a Finance Lease is the best asset finance option. For example, if you are buying equipment or machinery where you will be using it for the majority of its useful life, then a Finance Lease might not be the best option. Where you are buying an asset that will have a value after you have used it, for example, a van, a Finance Lease becomes a more attractive option as you will get back 95% (approximately) of the sales proceeds.
Operating Leases are ideal for a business wanting an asset for a specific period of time. If you don’t want to buy the asset and won’t need it for its full working life, an Operating Lease may be the right asset finance option for you.
The risk of ownership is with the lessor, they make assumptions on the end value of the asset, after you’ve used it, to come up with their residual value. They factor that into the rental payment you will pay each month. The rental payment won’t cover the full value of the asset.
This sort of asset finance works with assets that have a value when you have finished with them and can be sold on. Assets such as vans, planes, manufacturing equipment, construction equipment and cranes would be suitable for an Operating Lease.
At the end of the lease period, you give the asset back with no further payments to be made, assuming the return conditions have been met. If you decided you wanted to keep using the equipment, a fair market rent would be agreed and you could keep using it. These agreements often include maintenance packages too, so you don’t have to worry about some of the running costs of the equipment.
If you need to release capital from an asset you already own, such as equipment, vehicles, land or property, Asset Refinance can get you the cash you need.
The asset would be used as security for the loan so the amount you can borrow will depend on the value of the asset you want to use. As this is secured finance, the asset being used as the loan collateral is at risk if you don’t keep up the monthly payments.
What Are The Benefits Of Asset Finance?
Asset finance gives your business the ability to use the latest equipment, technology and vehicles without using significant lumps of cash in one go. You can also release capital from assets you already own with refinance options. The finance is available quickly and with fixed monthly payments it allows for easy budgeting.
Depending on your circumstances and the sort of asset you want to use, there are various products available that will best suit your needs. There are solutions, whether you need something for a short period of time, or if you want to own the asset when the agreement is finished.
Borrow from £1,000 and up
Repayment terms are flexible up to 5 years
Simple application process
Funds available quickly
Some Asset Finance Uses:
A wide range of businesses and industries can and do take advantage of asset finance options, here are a few examples.
Construction machinery can be very expensive but asset finance can help you use the equipment you need on-site. Do you need to buy cranes, excavators, loaders or trucks? These and other construction machinery can be accessed with our construction asset finance options.
You can also release capital from the construction machines you own by taking out an asset refinance.
Gym Equipment Finance
To keep clients happy, gyms need to have modern, fully working gym equipment. Whether you are expanding and need more machines, starting a new gym or want to upgrade to more up to date technology we have finance options available.
Buying gym equipment outright is expensive, so rather than take up all your cash you can use gym asset finance to your advantage. With some finance solutions having maintenance packages with them, you can keep the equipment in good condition and keep your clients happy.
Van Leasing And Van Finance
Is a van a vital tool for your business? There are many businesses who rely on having a van to do their work, from delivery drivers and retailers to plumbers, electricians, builders and joiners. Not having a reliable van could be very detrimental to business.
Using Van Finance options gives you the chance to buy the van you need or upgrade to a newer model – a nice van can make a good impression on potential customers.
Having reliable, efficient and up to date machinery and equipment is a necessity for many companies. No matter what industry you are in, if there is a machine you need, Machinery Finance could give you the ability to buy what you need without using all your cash reserves.
You could also release capital from machinery you already own, giving you a cash injection when you need it.
Our large funding panel can help you buy or lease all sorts of equipment:
Food Production Machinery
Food Processing Machinery
If you need to buy new machinery and equipment to either expand or be more efficient, Agricultural Finance could be a flexible solution for you.
All types of equipment are available through leasing and asset finance such as tractors, combine harvesters and cutting machines.
These machines are often very expensive to buy outright but by financing them, you can make them work for your business, without using up all your cash.
As with other assets, you can take capital out of equipment you already own, too.
Our panel of lenders are able to fund:
Front End Loaders
Company Car Leasing
We have options for businesses of all sizes whether you want to lease a single vehicle or a whole fleet.
Company Car Leasing means you don’t own the vehicle at the end of the term but you do have the ability to easily get newer vehicles and use the latest models for a fixed monthly payment.
This is like a long term rental and you will have an agreed amount of miles over a set amount of time.
Transport And Logistics Finance
If you are looking to buy or lease new vehicles like vans, trucks, cars and buses then Transport and Logistics Finance can help.
Buying these assets outright is very expensive, so many companies, both large and small, take advantage of asset finance. Rather than use your own cash to pay for a vehicle, you can take out Logistics Finance to spread the cost over a number of years at a fixed rate.
Asset finance can also make it easier for your business to have newer models by upgrading or trading in at the end of the agreement.
You can use Hire Purchase to buy the vehicle, at the end of the agreed monthly payments you will own it outright. Or you could use a sale and HP back to release capital from a vehicle you already own.
IT Equipment And Computer Leasing
The IT industry and technology move very quickly, so it can be very expensive to keep up to date with the latest kit.
Rather than using all your cash, our asset lenders can arrange Computer Leasing or IT Equipment Leasing for you to make your cash go further.
The sort of equipment you can lease includes:
Apple Mac Leasing
EPOS Point Of Sale Systems
Catering Equipment Finance
Kitchens and other food preparation equipment can be expensive to buy or replace. Using Catering Equipment Finance gives you finance options to make your capital go further and get the catering equipment you need.
Whether you want to buy a single piece of equipment such as a new oven, coffee machine or mixer or you need a whole kitchen refurbishment, we have funders and solutions for you.
Does Your Business Qualify?
We can discuss your specific needs and circumstances to see what you would be eligible for, and how we can help you get the asset finance needed for your business.