Fund the purchase of business assets using asset finance
How asset finance can help your business
We can assist you in acquiring the necessary assets or unlocking cash from owned assets, such as vehicles, plants, and machinery. This enables you to retain more cash for your daily business requirements.
What is asset finance?
True to its name, asset finance involves loans secured against an asset owned by the borrower. Given its secured nature, the interest rates and terms are typically more competitive compared to unsecured loans. This is because, in the event of repayment default by the borrower, the lender has the option to seize the asset and use the proceeds from its sale to settle the outstanding amount.
Asset financing offers a practical means for companies to acquire new equipment and machinery affordably. Paying for a significant asset upfront can pose cash flow challenges for some companies, and outright payment may be impossible for others. Asset finance provides the flexibility to spread the cost while allowing full use of the item during the payment period.
What is classed as an ‘asset’?
In general terms, an asset can be almost anything with a resale value, including vehicles, machinery, or a company’s stock. Asset finance isn’t a one-size-fits-all solution; it’s a broad term covering various lending types. The specific finance arrangement depends entirely on the asset you want to secure the lending against and its assessed value.
Some of the main types are as follows:
I. Hire purchase – Hire purchase provides a cost-effective method for acquiring costly equipment. In this arrangement, you purchase the required item, and the funding is facilitated through a hire purchase company. Subsequently, you make periodic repayments to settle the balance. Upon completion of the agreed repayment term, full ownership of the item is transferred to you.
II. Equipment leasing – Equipment leasing is frequently employed to acquire machinery or other large, expensive pieces of equipment. Unlike a hire purchase, ownership of the purchased item remains with the leasing company. Although the finance company owns the asset, you have exclusive access and use of the item, paying through monthly instalments.
Upon the term’s completion, you have various options. You can continue the lease by making ongoing monthly payments to retain use of the item. Another choice is to upgrade to a newer version by entering a new lease agreement, starting the minimum term afresh. Alternatively, you can opt to purchase the equipment by paying a pre-agreed lump sum or simply return it if no longer needed.
This flexibility makes leasing a highly popular method for funding the new equipment essential for a business’s continued growth.
Can asset finance only be secured on new purchases?
Absolutely, asset finance can also be applied to assets your company already possesses. Termed as asset refinancing, it serves as an excellent method to release funds tied up in your existing property. In refinancing, capital is obtained by using a crucial piece of equipment as collateral for the loan. This approach is frequently employed as part of a strategy to enhance a business’s cash flow and bolster its working capital.
Read More:
Which types of businesses may benefit from asset finance?
As asset finance encompasses various forms and applies to both owned and yet-to-be-purchased items, it is suitable for nearly any business, regardless of size. Like any loan, its approval depends on affordability.
Asset finance provides your business with the necessary resources for growth, offering a valuable means of unlocking the funds already invested in machinery, vehicles, and other valuable assets.
Asset finance encompasses a wide range of providers and products, presenting a sometimes overwhelming array of choices. Therefore, it’s crucial to prioritise seeking expert advice before proceeding. You must be certain about what you are committing to and confident that it aligns with your current and future needs. The last thing you want is to secure asset financing only to discover later that the items are no longer in use, realising in hindsight that a shorter-term or upgradeable option would have been more suitable.
Vanguard Insolvency has cultivated strong relationships with various asset finance providers, and we know precisely who to connect you with to secure the most fitting funding option for you and your business. Contact our team of finance professionals to explore your finance options and take the next step in advancing your business.
I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.