Asset Finance 2018-04-07T23:38:52+00:00

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At ABC Finance Ltd we’ve been securing funding for UK SMEs since the year 2000. We work with asset finance lenders across the market to secure the best possible terms for our clients. Read on to find out our detailed guide to funding your business equipment.

What is Asset Finance?

Asset finance is a type of business funding which is used to purchase or refinance the assets of a business. Acceptable assets can be classed as ‘hard’ or ‘soft’.

  • Hard assets include machinery, equipment and vehicles, equipment and machinery.
  • Soft assets can include furniture, lighting and internal refurbishment of premises.

Asset finance is designed to allow businesses to own the equipment they need to trade effectively, without the need to pay out large cash lump sums to purchase them.

Process & Criteria

The process of arranging asset finance can differ depending on the lender used.

Read our breakdown on the process of financing your assets and check out the latest criteria to find out if you could qualify. If your business is eligible for funding, you could receive written terms in under two hours.

Everything You Need To Know About Asset Finance

Click on the options below to find out everything you need to know about asset finance. Read our guides to find out how we can serve your industry, learn about the different products offered or check out our FAQs and jargon buster.

Using asset finance to purchase equipment for your business provides a twofold benefit. Firstly, the equipment needed to drive your business forward can be procured easily. By upgrading your equipment, you can see increases in efficiency and total output, allowing you to better serve your customers.

Secondly, by taking the asset finance route, you can protect your working capital by paying monthly, rather than taking a large cash lump sum out of the business.

Working with ABC Finance Ltd.

We work with our clients to make the process easy, cutting out unnecessary jargon and explaining everything in plain English. We take the time to understand your end goal and introduce your application to the decision makers at market leading lenders.

Once submitted, we will manage your application through to a timely completion, making the process simple and saving you time.

If you’re looking to invest in your business, for example, the purchase of new equipment, asset finance can help to release the money you need. Asset financing can be used for two purposes:

  • Raising capital against existing assets
  • Funding to purchase new assets

Assets can sound vague, but generally, any asset will be considered – from plant & machinery to medical equipment and even fleets of vehicles. There are a wide range of options to consider and looking for the right funding can be daunting.

Business owners often find themselves on the cusp of growth, almost ready to take the next step but unable to fund the new equipment needed to move forward. Asset financing is designed to plug that gap, in a flexible and affordable way.

We are able to support our clients with a wide range of flexible funding options designed to allow you to purchase the assets needed to drive your business forward. Asset financing is the third most common source of funding for business owners in the UK and is growing in importance year on year. Providing a flexible alternative to a bank loan which often sees monthly payments reducing in quieter times and increasing as business picks up.

Every piece of advice we offer is about supporting our client’s long-term goals. We ensure the right option is chosen at the right time, considering how a decision made today will affect your next step. We take this attitude into every asset finance application, ensuring you have the perfect product for your needs.

TALK TO AN EXPERT NOW

Talk to an Asset Finance Expert

Enquire online or call us now to speak to an expert. We’re happy to talk through your circumstances, offer initial advice, an overview of your options, or even full written terms on the best asset finance for you.

The Role of An Asset Finance Broker

Asset-based lending is a complex area of the business finance world and tracking an asset finance application without a broker can be time-consuming. There are lots of lenders out there, each offering a number of different products.

As rates aren’t usually published for you to check before you enquire, searching for a good deal results in you having to talk to numerous lenders.

A good broker will be able to access all the market leading rates, but crucially, will also be able to scour the market for you. This means you only have to talk through your situation with one point of contact, who will then do the legwork for you.

Their work doesn’t stop when the application is submitted, your broker will work with your lender to manage the application through to completion for you.

Asset Finance Rates

We offer low rate asset finance options from as little as 3% per annum. The rate offered can differ a lot depending on the lender selected, the type of asset and the company that is applying.

The lowest rates are usually reserved for strong assets, that offer security and hold a high residual value.

Bad Credit Asset Finance

Where you or your business have previously suffered adverse credit, many lenders will be unwilling to take on your application. Although this can seem like a dead end, we have a number of lenders who are happy to help and we can usually arrange funding quickly.

Where previous adverse credit has been suffered, the strength of the asset will play a large role in deciding the rate offered. Weak assets or assets with short life cycles may find the rate offered is far higher than the current high street rates.

Asset Finance Example

Stu’s Printing Co Ltd intends to buy a printing press for £175,000 and is looking into the best routes to fund the purchase. The preferred options are either purchasing it cash or using asset finance.

Although there is sufficient cash to purchase the press in one lump sum, it would leave very little cash left for any emergencies or unexpected costs that may arise.

The asset finance product offered will fund the entire purchase price of the machine, meaning there is no deposit needed. The deal offered is as follows:

  • Loan amount – £175,000
  • Repayment method – capital repayment
  • Monthly repayment – £3,183.56
  • Total cost of credit – £16,013.60
  • Monthly repayment – £2,563.92
  • Total cost of credit – £4,801.47
  • Term – 5 years
  • Interest rate – 3.5% per annum

The key consideration for the client would be the relative benefit of taking the finance vs the cost of credit.

In this example, by purchasing the machine with cash, the business’ cash flow position would become risky. A potential solution would be to put down a deposit on the machine and partially fund the purchase using asset finance.

By choosing to borrow only 50% of the purchase price, the total cost of credit would be dramatically reduced. This could be taken a step further by reducing the term, to further reduce the amount of interest paid.

The revised figures would be:

  • Loan amount – £87,500
  • Repayment method – capital repayment
  • Term – 3 years
  • Interest rate – 3.5% per annum

The above figures, although simplified for the purposes of the example, would result in a minimal cost to the client, and an affordable repayment. For the purposes of securing the businesses working capital position, this would be considered a small price to pay.

What to Consider When Applying for Asset Finance

Before you apply for asset finance it’s crucial that you’re aware of the pros and cons of doing so. Here are some key points to bear in mind.

Advantages

  • Financing equipment purchases may mean you can purchase better equipment than would otherwise be affordable.
  • The leasing company will often be responsible for the repair of the machine, should it fail.
  • The risk of buying new equipment is reduced as the cost is spread over a period of time.
  • The impact on the company’s cash flow is limited as the cost is not paid out as a lump sum.
  • Rates are usually fixed, meaning the monthly repayments should stay the same throughout the term.

Disadvantages

  • Depending on the finance terms, a deposit may still be required.
  • Some agreements can have significant early repayment penalties, should you wish to cancel the agreement early.
  • The total cost of buying the asset may work out more expensive than buying it outright.

Types Of Asset Finance

Another must-have before taking on asset finance is knowledge of the products available to you. For the best rates and repayment terms, you’re going to want to choose the right type of asset finance to suit your needs. The information below will get you started and you can find more information in our Asset Finance Products section.

Hire Purchase

Hire Purchase (or lease purchase) allows you to spread the cost of your asset over a longer period. Repayments are regular, and you have the option of buying the item at the end of the agreement.

Hire purchase can be beneficial to a business as it negates the need to pay out a lump sum for the purchase of an item. In addition, hire purchase agreements tend to benefit from fixed monthly repayments, which can make forecasting financials much more straightforward.

During your hire purchase contract, you are generally responsible for maintenance costs for the asset. The likely costs of maintenance should be considered on top of the monthly repayments.

Finance Lease

The finance lease is designed to give business owners the option of borrowing an asset for the majority of it’s predicted life, rather than purchasing it outright. This can be beneficial to cash flow, as new equipment does not have to be paid for upfront.

A finance lease will usually see you pay the full price for the equipment over the course of its life. As it is rented rather than bought, it never appears on your balance sheet and the rental payments can be offset against profit and VAT.

Operating Lease

An operating lease, also known as contract hire, is the most well-known form of leasing. In simple terms, an operating lease is a rental agreement for an item, for a pre-agreed term.

Asset Refinance

Asset refinance is used to release capital from assets back into the business and is designed to aid cash flow. Asset refinance allows a business owner to sell their asset to the asset finance provider before leasing it back on agreed monthly payments.

The capital released not only provides a boost to the bank balance but the company still benefit from the use of the asset.

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