If you work in financial services, banking etc then you probably know the answer to this. Many in the industry assume that customers know what it is as well. Close Brothers have been conducting a quarterly survey for a number of years where they ask SMEs “Have you heard of Asset Finance?”. If you look back as far as 2013, the percentage responding positively to this question has consistently only hung around the 40% mark!
“Asset Finance” is a collective term used to describe Hire Purchase & Leasing products for businesses. It is one of the most common forms of external finance used by SMEs and is frequently used by larger business as well.
Asset Finance products allow business access to equipment, vehicles, plant, machinery etc which they may not be able to afford due to a lack of cash flow. They usually involve paying a monthly charge (repayment) for use of an asset over an agreed period of time, therefore avoiding the full cost of buying it outright. Assets financed in this way can vary from small to large. It could be a photocopier or coffee machine through to vehicles, heavy plant, marine vessels and aircraft.
Common examples of Asset Finance products are:-
Hire Purchase (HP): allows the customer to buy the equipment on credit. The finance company purchases the asset on behalf of the customer and owns the asset until the final instalment is paid, when ownership transfers.
Finance Lease: The full value of the equipment is repaid to the finance company, plus interest, over the lease period. At the end of the term, the company can choose to:
- return it
- continue to use the asset by entering a secondary rental period
- sell the asset and keep a portion of the income from the sale
Operating Lease: Similar to a Finance Lease, an Operating Lease allows the business to rent the asset from the finance company while they need it. The key difference between the two is that an Operating Lease is only for part of the asset’s useful life. This means the business pays a reduced rental because the cost is based on the difference between the asset’s original purchase price and its residual value at the end of the agreement.
It is also possible to refinance assets that a business already owns. This is often referred to “Sale & Hire Purchase back”. Here the finance company purchases the asset from the business, releasing the funds back to help the business’ cash flow. The funds raised will vary depending on the type, age and value of the assets involved. At the end of the finance term, ownership of the assets returns to the business.
What benefits does a business get from using Asset Finance?
- They give businesses access to the equipment they need without incurring the cash flow disadvantage of an outright purchase, this means business has access to the latest equipment which may be more efficient than older equipment.
- Finance agreements can often be tailored to the business’ needs, with flexibility on both the term and repayment schedule
- Leasing and HP are excellent budgeting tools as payments are usually fixed, allowing improved cash flow management
- Asset finance providers often specialise in a particular type of asset about which they have expert knowledge
- Generous Capital Allowances are available when purchasing assets and a on new assets purchased from April 21 to March 23, companies can claim a 130% capital allowance on qualifying plant and machinery investments.
At Lochend Finance we have access to a wide panel of lenders who specialise in Asset Finance, whether it be Hire Purchase or a Finance Lease. Not all lenders are comfortable financing certain asset types and some are more flexible than others if your personal or business credit history is less than perfect. At Lochend Finance we will match you with the funder that best suits with your circumstances. Please email info@lochendfinance.co.uk for more information on Asset Finance or call Stuart on 07485 174395.
The following list is not exhaustive but helps you understand the types of items that can be financed. You can also see examples on our “Completed Deals” page
- Vehicle Finance
- Motorhome Finance
- Campervan Finance
- Crane Finance
- Car Finance
- Company Car Finance
- Van Finance
- Truck Finance
- HGV Finance
- Tractor Finance
- Agricultural Equipment Finance
- Director’s Car Finance
- Classic Car Finance
- White Van Finance
- Trailer / Tanker Finance
- JCB Finance
- Yellow Plant Finance
