If you own a small business and are looking to buy new equipment or make investments in the infrastructure of your business, you will be interested in the concept of asset finance. For small businesses, asset finance is a simple way to buy the equipment you need to make a difference to the financial health of your business. You get the assets you need while conserving your working capital, which is highly important when you are building a healthy cash flow. Find out more about asset finance for small businesses with our quick guide.
What is Asset Finance?
Using an asset finance facility you work with a lender who buys the asset for you, and then you pay back the lender by paying fixed payments over a set number of months (usually an asset finance agreement will last one to five years.) This is completed under a Hire Purchase or a Leasing setup, and at the end of the term you can buy the asset from the company for a set, small price. Some asset finance deals also include options for asset refinance, which can free-up the capital you already have invested in equipment.
Steps to Asset Finance
You decide what you want to buy – vehicles, equipment, machinery, plant etc. – and the asset finance company provides the money to buy the asset. They own the asset while you take possession of it and use it for your business. You pay a fixed amount each month to the company and at the end of the agreement you have the option to buy the asset outright – or return it to the company.
Benefits of Asset Finance
Asset finance allows you to buy the assets you most need for your company while retaining the working capital you have built up. For example, you may need more delivery vans or bikes for your business in order to be able to build up a network of more clients. But vans are expensive and if you purchased them outright you wouldn’t have the cash available to pay your drivers. But without more vehicles you can’t expand. Asset finance fills the gap without having to resort to a personal or business loan. It is also easier to budget and set your expenditure when the monthly repayments are fixed. As asset finance is an established option for small businesses, it is usually quick and easy to sort out an asset finance agreement. You don’t need large amounts of capital or to have been in business for many years. It’s a flexible alternative when you need new equipment or vehicles and you do not have a large amount of money to use to buy the assets outright. When arranging an asset finance agreement, make sure you find a reputable company that will meet your individual needs.