If your company currently owns assets outright, such as production equipment, machinery, furniture, vehicles or even fixtures and fittings – then you may be able to borrow money against these items. For example, if you own a gym and need to release some cash fast, you can asset finance your gym equipment. You will pay it back in monthly lots, however, if you can’t keep making payments, then the lender will simply come and take away the gym equipment to recoup the loan.
Asset Finance essentially unlocks potential cash that your business has already spent.
However, with asset finance, you can only borrow up to the value of the assets involved. For most people Asset Finance is used in conjunction with other products, to release extra capital, debt consolidation or to de-risk lending for the company and its directors.
There are thousands of Asset Finance lenders in the market, with some that specialise in certain assets and some that will finance anything. Usually, with Asset Finance the asset must be critical to your business and it must always be removable – so the finance company can take it and sell it easily to recoup the loan if you stop making payments.
Asset finance is a type of lending that offers a great choice, whether you want to extract cash from assets that the company already owns or want to buy new assets so you can grow your company. Get in touch with us today and let our brokers and partners help you choose the right type of asset finance for your business and goals. We have helped thousands of businesses access asset finance, which has made their companies grow.
Equipment for some businesses is the difference between growth and failure. Not just is equipment crucial to carrying out the work, but often can be the difference between you and your competition. However, how many people would pay for several years’ worth of rent upfront? Not many. So why are we so prepared to pay for our equipment the same way?
Equipment finance essentially allows you to spread the cost of an asset over a long period of time. Usually, these are related to big-ticket items that companies need so they can keep growing. When small businesses are starting out, they just don’t have the capital or credit available to buy the equipment they need to grow or start.
More established businesses on the other hand who can afford to pay for big-ticket items can see the opportunity cost for their money. They will prefer to save or spend their cash in other areas of the business that could give them better returns, rather than wasting it on depreciable assets upfront.
Below is a list of different types and ways to fund different types of equipment:
Equipment Leasing is when the lender buys the asset for you on your behalf, which they then lease back to you. The advantage of doing it this way is that you get it immediately and only need a fraction of the cost to get started. Different to Hire Purchasing, you can normally pay the VAT over the whole loan period instead of the upfront and normally they just require one month’s rent to get started. At the end of the lease, you can either buy the asset at a reduced cost, give it back to the lender or continue leasing the item.
Another advantage of leasing is that the company has the freedom to upgrade the asset as they grow over time, while still technically retaining ownership. Regular upgrades, servicing, tax efficiency, and cash flow management are just some of the benefits of leasing assets.
Hire Purchasing is an easy way of buying an asset and spreading the costs over time. You pay in instalments, which means the item appears on your balance sheet and you will be responsible for maintenance and insurance costs because you own the asset — but you will also have full ownership of the item after the term ends. In the gym, industry hire purchasing equipment is often used. The gym is responsible for the upkeep of the machine and will own it at the end. Meanwhile, the gym was able to get the money to buy the equipment in the first place, spending less cash and capital. For the lender, the equipment is easy to sell again, if the business stops repayments.
Plant equipment finance
These are typically specialist heavy-duty moving items, or yellow ticket items, which they are sometimes called. If it can shift, lift, has tracks of makes a loud noise – it will probably be funded by Plant Equipment Finance. These are specialist items, but also very popular with finance companies, as they have easy and high resale values.
Pros to Equipment Finance
So why is Equipment Finance better than buying goods outright.
- Cashflow – It is hard to access cash when a business is starting out or small. Equipment Finance allows companies to access funds, that are guaranteed by the equipment. Allow their cash to be used in better areas. Alternatively, larger SMEs who may be cash-rich can use their cash in other areas that will make them better returns.
- Tax – Leasing fees are a loss to your business. As you don’t actually own the asset it isn’t on your balance sheet. Meaning that all costs to maintain the lease is loss-making. You can then write this off against your profits to lower your corporation tax bill.
- Predictable Payments – Usually, Equipment Finance takes the same amount out every month, meaning your company will always know what is coming out. This makes it easy to budget and manage cash flow.
- Flexible and scalable – If you finance one piece of equipment, it is quite easy to finance several without a large outlay. Expansion is easier with Equipment Finance. Less investment needed when investment will be harder to find.
Equipment finance works for an endless amount of industries and sectors. Our Brokers and Partners can help you find equipment finance for:
- Trucks and HGV’s
- Taxi Finance
- Limo Finance
- Agricultural & Farming
- Racking warehouse equipment and shelving
- Minibus finance & leasing
- Commercial vehicle leasing
- Gym and fitness
- IT, Software and Technology
- Office furniture hire & leasing
- Bars and pubs
- Restaurants and Cafes
- Bakeries and Coffee Shops
- White Vans
- Car Garage or Mechanics
- Laundry and Dry-cleaning Finance
- Manufacturing and Heavy Industry Finance
- Office and IT equipment
- Refrigeration and air conditioning