What is asset finance and how does it work?
Asset finance is a means of lending that allows the business to obtain whatever assets they require in order to grow and operate. The business would pay a regular fee for the use of the asset over an agreed period of time. The business can also release cash from the value in assets they already own too.
What are the benefits of asset finance?
Asset finance in the form of equipment or vehicle finance or leasing can be used to raise funds for a variety of purposes including working capital, financial re-structuring or buyouts etc either by financing or re-financing plant and machinery.
Our specialist area is the obtaining of asset finance including equipment and vehicle leasing for areas ignored by larger lenders and that includes new start companies, the re-finance of existing assets, buy out finance and companies with adverse credit history including those in CVA
In addition we can also help secure asset finance for assets with low residual values including computers, telephone systems, air conditioning and refrigeration equipment etc.
Repayments can be tailored to meet specific requirements over periods of 6 months to 5 years with a typical time period being 3 years.
Recent asset finance deals include the following:-
1) Purchase of commercial vehicles for a company in a CVA.
2) Refinancing of machine tools where the company’s own bank had wanted a second charge on the director’s home to do similar.
3) Purchase of vehicles for a company with adverse credit history and arrears of prefs.
4) Purchase of second hand plant for new start air conditioning manufacturer.
Asset Finance – Types of Finance and the Benefits of Asset Finance
• Assets are funded from income stream and not capital.
• Asset finance rates are often cheaper than other methods of finance.
• Asset finance does not use up existing finance facilities.
• The company has the benefit of the use of the asset without fully paying for it.
• Fixed rates are available.
• Tax advantages in some cases
Types of Asset Finance
Leasing and hire purchase are the two main options available:-
Hire Purchase – Under the terms of a hire purchase agreement the company will own the asset after all the payments have been made but for tax purposes the company can claim capital allowances from the commencement of the agreement which can be offset against taxable profits
Leasing – Under the terms of a leasing agreement the company never owns the asset but effectively rents it from the lessor. The leasing company will claim the capital allowances and passes this on to the company in the form of reduced rentals. Usually the company can offset the rentals against income
Even more importantly our brokering service can put you in touch with UK asset finance companies who are innovative enough to devise new ways to help where possible. As a broker, our services are completely free of charge so please contact us with no obligation to see if we can help.
Asset Finance Types of Leasing – These come in three main forms or types
A medium-term lease over the expected life of the equipment which is usually three years or more. Subsequently you can pay a nominal rent to continue using the equipment if you wish. The leasing company should have recovered the cost of the equipment plus their charges over the period of the original lease. The lessee is responsible for the maintenance and insurance of the equipment despite ownership still being vested in the leasing company.
This is used where the company doesn’t require the equipment for the whole of it’s working life. The leasing company will take the asset back at the end of the lease. The leasing company is responsible for maintenance and insurance.
Used mainly for company vehicles. The leasing company shares the responsibility for management and maintenance, such as car repairs and servicing. The asset isn’t shown on the company’s balance sheet.
As an Asset Finance Solutions Broker, we have a good relationship with many of these niche players, and know who can offer what type of funding to whom. Even more importantly our broking service can put you in touch with UK asset finance companies who are innovative enough to devise new ways to help where possible. If you prefer you can call us on 01827 707680.