What is Asset Finance?

This type of finance is used to describe ‘Leasing’ or ‘Hire Purchase (HP)’ solutions for businesses. There are various products available which allows businesses to purchase assets which might otherwise be out of reach due to cash flow or have the need or opportunity to grow but may not have the funds readily available.

The leasing or HP products usually involve paying a regular charge for an asset over an agreed period of time (term), which avoids the full cost of buying the asset outright.

The purchase of assets in this way can range from small i.e., office telephone equipment, coffee machines to large i.e., heavy goods vehicles, plant and machinery.

Why use Asset Finance?

Asset finance is very flexible and can be used to fund any size of asset and it could be the perfect solution if your business needs new equipment or machinery that is unaffordable but is needed to help the business grow. This type of finance is suitable for all companies ranging from sole traders, small to medium-sized enterprises, as well as larger companies and corporations. 

  • It gives businesses the ability to purchase equipment without impacting cash flow if they were to buy it outright. Moreover, it allows businesses to have equipment and machinery that is the most up to date and therefore may well be more efficient than existing assets. 
  • Tailored agreements to the business’ requirements can be made which provides flexibility on the amount being paid (repayment schedule) and the term of the agreement. 
  • Leasing and HP agreements are usually fixed which improves cash flow management and thus are an excellent budgeting tool. They are also a useful alternative to bank loans or overdrafts which normally charge higher interest rates. 
  • When using asset finance to purchase very expensive machinery or equipment, the asset itself acts as the security for the loan. 
  • If leasing or hiring, expensive equipment or vehicles maintenance and servicing costs are all borne by the provider, not your business (depending on the type of finance deal arranged) 
  • The depreciation risk of the value of the asset may fall to the provider and not the business. Additionally, if the asset requires replacement before the end of the agreed term, then the provider must replace this at their own cost (depending on the type of asset finance agreement). 

Types of Asset Finance