I need to invest in machinery or vehicles
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Starting out in business, many company owners try to keep borrowing to a minimum, relying on savings or the support of friends and family to get their venture off the ground, but as they become established and there is a regular flow of orders or clients creating a steady income they may require some capital investment. Whether it’s new machinery to meet demand, a vehicle or investment in a company fleet, a large financial decision can impact a business’ performance and cashflow. For many owners it comes down to a decision as to whether it’s best to use hard-earned reserves or apply for finance to cover the cost.
When should I use asset finance?
Exactly as the name suggests, asset finance is a type of commercial finance which enables a company to acquire a new asset – machinery or vehicles being just two common examples – while protecting working capital. In simple terms, asset finance is an agreement between a company and a lender with regular repayments.
What are the benefits of asset finance?
Asset finance can be a hugely flexible finance tool with the option to own the asset at the end of the agreed term (hire purchase finance) or replace it every few years (leasing finance). Asset finance can be used for new or used equipment, and for refinancing of an existing asset to generate cash.
With specialist knowledge and understanding, an asset finance lender will agree terms that work for your business and you can operate knowing that the agreement is fixed, cannot be withdrawn or increased, so long as you make the required payments.
Why should I use asset finance?
Asset finance helps to keep available cash in your business and create a strong contingency buffer that allows your business to bounce back from any unforeseen events. Having a cash reserve may also provide flexibility to take advantage of opportunities or potentially negotiate a discount for faster payments to suppliers. Borrowing will attract interest but the benefits of having cash available at short notice will undoubtedly outweigh the costs incurred.
When should I use asset finance?
Asset finance can be used for many scenarios and there are numerous options to consider. The most common type of asset finance is hire purchase which can be used for any asset and enables a company to buy equipment or vehicles, just two examples, over an agreed period. However, every business and sector is unique and there is a lender for almost every scenario. Working with an expert business finance broker such as Complete Commercial Finance enables you to find the best asset finance product for your business and your circumstances.
What do I need to do to secure asset finance?
With asset finance, a lender’s primary security is the asset itself which it will be entitled to recover and liquidate should a business not keep up with regular payments, as per the finance agreement. Consequently lenders may be willing to offer a company asset finance even if they have not been established for very long. One company won a major contract which required additional transport and, although it had not been trading for very long, it secured asset finance to enable it to purchase the equipment it needed.
What are the disadvantages of asset finance?
While there are no real disadvantages of asset finance, it’s important to understand that you are entering an agreement with a commitment to meet the required payments regularly. As such it’s important to ensure you don’t overcommit yourself and try to ensure there are sufficient reserves to overcome unforeseen circumstances.
How long does it take to organise asset finance?
Asset finance can often be organised quickly with a response to an application typically given within 48hrs and funds available to be drawn down in a week.
