Asset finance allows you to purchase an asset for your business by spreading the cost over monthly repayments meaning you won’t need to use your working capital.
Asset Finance allows you to acquire the asset you need when you need it. An asset is bought on your behalf by a funder, and you effectively repay the cash price plus interest through regular payments, usually at a fixed rate to help with budgeting. Then at the end of the agreement there is a nominal fee to pay to gain ownership of the asset.
Most businesses need assets like machinery or vehicles to operate. Asset Finance is an easy way to fund what you need to update or invest in new assets which can be expensive. Asset Finance (Leasing and Hire Purchase) is used by a business to purchase an asset when it is needed. This could be to ensure its equipment is fully up to date, ensure maintenance costs are low or to invest in equipment required for a new contract.
Instead of paying the full cash price, you can spread the cost over a pre-determined time to ensure you don’t deplete cash reserves which you rely on to fund your future growth.
All types of assets can be funded from vehicles, plant and equipment through to soft assets which are assets that don’t hold their value quite so well or are more bespoke to the business purchasing it.
Facilities can be made available to clients from small transactions from as low as £5000 through to multi-million-pound facilities for major corporate clients with significant project finance plans.
There are six main types of asset finance:
Hire purchase: Hire purchase agreements let you spread the purchase cost of an asset, like a car or equipment, over a longer period with fixed regular payments. It can be flexible on the cost of your deposit, monthly payments and the final lump sum to suit your business needs.
Equipment Leasing: Equipment leasing is a type of financing in which you rent equipment rather than purchase it outright.
Finance Lease: A finance lease is where you rent the asset over an agreed period of time and you usually remain responsible for the maintenance.
Asset Refinancing: Asset refinancing allows your business to improve cashflow by using the equity built up in assets already on your business balance sheet.
Operating Lease: Similar to a Finance Lease, an Operating Lease allows you to rent the asset from us while you need it.
Contract Hire: Contract hire is a long-term vehicle rental agreement that is a solution for businesses looking to rent a new vehicle and is becoming increasingly popular as an alternative to purchasing brand-new vehicles.
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Asset finance agreements are typically repaid over several years, making this an attractive medium-term borrowing option. Usually with a fixed interest rate which makes it easy to budget or for planning future expenditure.
Whether a new asset is purchased or an existing asset refinanced, the mechanics of asset financing mean that repayments are fixed for a set term. Although the structure of asset finance products may differ the outcome for the business is stable cash flow and easier budgeting.
A consideration as the asset is secured is that restrictions apply if the business wants to sell or otherwise dispose of it. The lender must be informed before a sale, and the outstanding balance repaid in full by the borrowing company.
Term Length: Assets can be funded for up to 7 years.
Useful Life: Funding can be arranged over the useful life of the asset, sometimes with a balloon payment.
VAT: You can delay paying the VAT on hire purchase agreements for 3 months through a VAT deferral option.
Some of the advantages of using asset finance are:
Asset finance is designed for any type of business, from eligible limited companies, SMEs and partnerships, to sole traders, public limited companies to large corporates.
It’s targeted at those who wish to purchase an item that has high value to support their business’s growth but want to spread the cost of the item over its usable life.
MAF Finance Group can compare finance offerings from a wide panel of lenders to find the best option for you.
If you would like to get a quote or need further information, simply fill in the form and we will contact you. If you want to speak to someone directly, you can call us on 0115 958 6872 and a member of our team will be happy to speak to you. Alternatively, email us at firstname.lastname@example.org.
Asset refinancing is a way of raising capital against assets you hold on your balance sheet.
Asset-based lending (ABL) is a type of finance in which a business can use its assets, such as inventory and property to release working capital.
A finance lease is simply renting the asset over an agreed period of time and you usually remain responsible for the maintenance.
Hire purchase allows your business to buy an asset by spreading the cost over a fixed period of time with regular monthly instalments.
Invoice finance provides early access to the funds owed to you in unpaid invoices. If you find your business waiting for customers to pay for your services or products, you could use invoice finance as a way of getting paid sooner.
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