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13/08/2019

You have bold ambitions for your business but lack the sufficient financial muscle to bring those plans to life, Asset finance can help. It provides you with the equipment and infrastructure you need to grow without the upfront cost. Let’s take a brief look at the different types of asset finance available.

Hire purchase

It’s flexible, it’s simple and it’s one of the most common types of asset finance. Hire purchase allows you to spread the cost of an asset purchase over a period of time with fixed regular payments. You can tailor the terms of your agreement including the loan period, the frequency of payments and so on to match your specific circumstances.

Writing down allowances may be claimable on your agreement and you may also be able to offset the interest against your profits and reclaim VAT upfront on the purchase.

Finance lease

Another common type of asset finance is the finance lease. Here your lender retains ownership of the equipment or vehicle, though it is yours to use as you please in exchange for a fixed number of rental payments. You are responsible for maintenance and insurance costs.

At the end of the agreed term, you can hand the goods back to your lender, renew your rental agreement or sell your goods to a third party

Operating lease

What happens if you only require equipment, vehicles or infrastructure for a set period of time? An operating lease allows you to rent the assets you require for a period of, for example, one to three years, with no upfront cost. At the end of the agreed term you hand the assets back to your lender.

It’s a great option to consider if you are concerned about the risk of owning obsolete equipment. For example, an operating lease allows your business to capitalise on the latest technology, while preserving cash. At the end of the lending term you can upgrade to even newer technology via another operating lease, rather than being lumbered with equipment that is past its best.

Commercial loan

For one-off purchases a straightforward loan may be the most suitable and cost-effective option for your business, particularly if you require shorter repayment terms than those traditionally associated with leasing or hire purchase arrangements.

Which type of asset finance is right for your business?

We have been through the main different types of asset finance. But which is right for your business? That all depends on the nuances of your turnover, your credit history and your net worth as well as the type of asset you are hoping to purchase.

Choosing the right type of asset finance, from the right type of lender, can have a seismic impact on your balance sheet. Yet with so many lenders out there, knowing what’s most prudent for your business isn’t easy.

That’s why we offer straight-talking support to help you find the most suitable asset finance options for your circumstances. As an independent financial advisor we have access to the entire asset finance market and can take you through the best options step by step.

For a free initial consultation – no strings attached – please get in touch to arrange an appointment with one of our advisors.

Nick Cross

This article was written by Nick Cross

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