Asset finance is one of the best ways in which you can fund investment into your business while still maintaining cash flow. Do it properly and asset finance can save your company money.
Asset finance is a form of leasing arrangement between you and a leasing company where instead of buying equipment outright, you enter a hire agreement by paying an agreed monthly sum for a period of usually between 1-5 years where you hire the same equipment and the right to use it.
Utilising an asset finance arrangement offers you and your company a number of ways in which you can save money:
Efficient cash flow
Using a monthly arrangement can be a more efficient method for start-ups and SMEs to control their cash flow. One the main reasons asset finance is popular is because spreading payments out over an agreed term can free up working capital to other areas of the business.
No additional security required
Because the asset arrives with a strong value against it, often no further security is required from the borrower helping the business build up credit for other asset purchases or for additional lines of borrowing.
You can borrow big or small
Whether you are looking for £100,000 of plant machinery or a £1,000 fish tank, there will be asset finance available to fund whatever you need. This means that for whatever you require you can access machinery, plant, tools and equipment without having to save up a sizeable pot of money beforehand.
Tax benefits
Asset finance payments are considered a business expense which can be written off against your taxable profits, thereby paying less tax. Buying an asset outright means you can only write down the depreciation and the loan interest which could be lower than your lease payments. By leasing you can save money on your tax bill at the end of the year. Remember that VAT is also payable on the rental, not the purchase price, so while providing an immediate cash boost, being able to reclaim your VAT might also help cash flow too.
You don’t pay for maintenance or repairs
As you don’t own the asset, in many cases you won’t have to fork out for costly repairs and maintenance bills, which usually form part of the agreement. Most leases will also have the option of providing maintenance and support with the finance company.
Maintaining technological relevance
Once your agreement comes to an end, you have the option of extending it, paying the outstanding balance to own it outright, or renewing the agreement to take advantage of newer technology. In many industries, newer technologies and customer demand mean better machines, more efficient processes and ever-changing product lines are required. Using asset finance is one way of ensuring your business has ready access to these equipment resources to stay at the forefront of your industry. Buying a new machine every two years can be costly, but having a finance agreement which can be amended, updated and renewed helps businesses change with the shape of demand, technology and profitability.
Asset finance can be used for almost any type of equipment
The range of asset finance options in the UK is wide. There are hundreds of different asset classes and most types of assets will have a specific group of specialist lenders. Choosing a specialist lender will often come with the benefit of being able to discuss and get advice from the asset lender in regard to your particular business asset use. This can result in better uses for your equipment or the realisation of alternative income streams.
Asset finance is one of the most popular forms of finance in the UK. If you aren’t using it or are looking for a better deal on your next lease or want to learn more about our finance packages contact us today for a free, no-obligation chat with a member of our team!
