Asset Finance - Improve cash flow and gain tax benefits, bespoke finance options to suit your needs
According to the Finance Leasing Association (FLA), Asset Finance is the third most common source of business finance , after bank overdrafts and loans. More than this it funds around 25% of all fixed capital investment and provides finance to around 20% of all SMEs.
So what is it? Asset Finance tends to be divided into two main ‘products’ – Leasing and Hire Purchase:
How leasing works
Leasing is an affordable, secure means of finance, often favoured by companies who want to have the use of equipment, machines or vehicles without ever actually owning them.
Under a leasing agreement, the leasing company (known as the lessor) buys and owns the asset. The customer (or lessee) then effectively hires the asset, and pays a monthly rental over an agreed fixed contract period. At the end of that contract period, the customer usually has a choice of extending the lease, buying the asset or simply returning it.
How Hire Purchase works
Hire Purchase differs fundamentally in that it is designed as a method for companies to pay for an asset over time and ultimately own it.
Under a Hire Purchase agreement, the customer pays an initial deposit, with the remainder of the balance and interest paid over an agreed period. On completion, ownership of the asset transfers to the customer. As part of the agreement you will usually also be responsible for the maintenance and repair of the asset.
The benefits
A key benefit of asset financing is that you can generally claim back the full cost of the lease as a trading expense. Also, for tax reasons, you are viewed as the owner of the asset and are eligible to claim capital allowance tax.
With the regular nature of payments and with them usually being a set amount, you are able to better forecast your cashflow. In some instances you can also see a direct correlation between the revenue generated by the asset and the cost of the repayment
Assets we can help finance
We can help in raising the finances for a wide and diverse range of equipment. Here are some of the most common:
- Cars and Vans
- Buses and Coaches
- Heavy Plant and Machinery
- Technology
- Haulage
Asset finance experts
If you are struggling to free up cashflow for the purchasing of new equipment for your business and would like assistance, then why not contact us. We work with over 20 specialist lenders throughout the UK and are perfectly placed to find the right financial product for your business needs.
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