Asset finance is the simplest way to get the equipment you need without the upfront cost.
What is Asset Finance?
Asset finance is a popular choice for businesses that need to obtain business assets such as equipment, machinery, and vehicles but don’t have the upfront capital to purchase them outright. Businesses can also use Asset finance to release cash that’s tied up in the value of their current assets, this type of asset finance is known as refinancing. There’s a variety of different forms of asset finance on the market, here’s an overview of the most popular types.
Leasing is a tax efficient way to purchase the equipment you need without compromising your cash flow. An equipment lease is where the lender buys the asset you need and rents it to you on a lease. It’s flexible as it means you receive it immediately at a fraction of the cost, you can spread the cost of the VAT across the term of the lease, and at the end of the lease you can decide to continue leasing the asset, buy it outright for an agreed price, upgrade to a newer piece of equipment on a new lease, or return it.
We work with some fantastic lenders, with terms from 1-5 years with only a minimal deposit.
Hire purchase involves purchasing an asset and paying it off in installments over an agreed term, with the option to purchase the asset outright for a small fee at the end of the agreement. With Hire Purchase, you generally pay a higher amount upfront than you would for equipment leasing.
The main advantage of hire purchase is that you will eventually own the asset and is usually a cheaper and more suitable option if the asset is a long-term investment. If you only need the asset for the short-term, leasing may be a better option, as with hire purchase, most lenders charge interest on the monthly payments so you will inevitably end up paying more for the asset than its cash price and VAT normally tends to be payable upfront, as well as a sizeable deposit.
Also referred to as a ‘capital lease’, this type of lease falls somewhere between equipment leasing and hire purchase. You get full use of the asset and pay for the full value over time, but you technically never own. But this means it doesn’t appear on your balance sheet, so it’s possible to offset rental costs against profit and claim VAT — which could be tax-efficient depending on your situation.
The key difference between a finance lease and an operating lease is that an operating lease is only for part of the asset’s useful life. This makes it a cheaper option because you don’t pay for the full value of the item. Like finance leases, an operating lease won’t appear on your balance sheet, which may have some tax benefits.
In contrast to the other forms of asset finance, refinancing allows you to release cash that’s tied up in your existing assets, like equipment, vehicles or buildings. Asset refinancing involves securing a loan against valuable assets that the business already owns, and like any secured loan, if you can’t keep up with repayments on the loan the lender takes the asset to recoup what’s still owed.
This form of asset-backed finance is a popular choice for debt consolidation and tends to lend itself better to established businesses as it requires there to be existing assets in the business that can be secured on. Plus, the amount you can borrow is entirely dependent on the value of the asset involved, and lenders all have different criteria in terms of what they’re willing to secure against. Some specialise in one specific area and others will finance almost anything that has a resale value.
Asset finance arranged through Fundaco
If you’re looking to purchase a new asset, or already have assets in the business that you’d like to refinance then asset finance could be the ideal solution for your business. However, you should consider things like your current tax position and depreciation of assets amongst other things. It’s important to ensure you opt for the type of finance agreement that works for your business in the long-term too.
By applying for asset finance through us, we’ll help you narrow down your options, manage the entire the process directly with the most suitable lenders, and guide you to the best solution giving you peace of mind you have got the best deal available. And the best part is, it won’t cost you a penny – our fee is paid directly from the lender.
We have access to a selection of lenders who can offer the following:
- Funds within 48 hours
- Get up to 90% of asset value
- Raise finance against existing assets, this includes property
- Fund all size and types of assets
- Terms up to 5 years
- Rates from 2.95% per year