Asset Finance
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.
Last updated: 16/01/2025
What is Asset Finance?
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 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.
Types of Asset Finance?
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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How does Asset Finance Work?
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.
Things to consider for Asset Finance
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.
Advantages of Asset Finance
Some of the advantages of using asset finance are:
- Easier to obtain than traditional bank loans
- Fixed payments make budgeting and cash flow simple to manage
- Spreads the cost over time
- Releases capital for use elsewhere in your business
- Most agreements have fixed interest rates
Who is Asset Finance for?
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.
How to apply for Asset Finance
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 [email protected].
Asset Finance FAQs
What is a balloon payment?
A balloon payment is a large, lump-sum payment due at the end of an agreement. It is typically used to reduce monthly payments during the term of the loan, but the remaining balance must be paid off in full at the end. This payment can be refinanced, paid in cash, or settled from the sale of the financed asset.
Can I finance equipment if I currently own it?
Yes, you can finance equipment you currently own by selling it to a lender or leasing company and then entering into a lease agreement to continue using it. This allows you to unlock the capital tied up in the equipment, freeing up funds for other business needs. While you no longer own the equipment outright, you can still have full access to use for business operations.
Can I include maintenance costs in an asset finance agreement?
Yes, you can include maintenance costs in an asset finance agreement, depending on the lender or finance provider. Some agreements offer the option to bundle maintenance and servicing costs with the asset finance. This can help simplify budgeting by turning it into one manageable payment, ensuring the asset remains in good working condition throughout the term of the agreement.
Can I apply for asset finance as a sole trader?
Yes, as a sole trader, you can apply for asset finance. Many lenders offer financing options tailored to sole traders, allowing you to purchase or lease equipment, vehicles, or machinery. The approval process will typically consider your personal credit history, business cash flow, and the value of the asset you're looking to finance.
What is the difference between a business loan and asset finance?
A business loan is typically unsecured, meaning no collateral is required, and the lender relies on your business’ creditworthiness to approve the loan. In contrast, asset finance is secured against an asset, such as equipment or vehicles, which serves as collateral. This makes asset finance often easier to obtain for businesses that may not have strong credit or prefer to keep other assets unencumbered.
Can I end an asset finance agreement early?
Yes, it is possible to end an asset finance agreement early, but it typically involves early termination fees or penalties. The terms for early termination are stated in the finance agreement and may include paying off the remaining balance or a portion of the asset's value. Ensure you have read through the finance agreement thoroughly to understand the full details.
Benefits of using a finance broker?
Whilst banks can offer different rates, they often reject certain types of purchase and have strict lending criteria. MAF Finance Group has access to a panel of specialist lenders with a variety of options and rates that are not available to customers who go direct. We can also explore the whole lending market, saving you time and effort whilst giving you competitive rates and a greater chance of acceptance.
Why choose MAF Finance Group?
As a leading nationwide finance broker, we have access to a full market of funders, banks and alternative funders. With dedicated teams of sector specialists and industry specialists in the construction, healthcare, agriculture, renewables and fleet management sectors we can help all businesses with their funding requirements.
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