Business Asset Finance: A Guide for Small Business Owners

Intro to Business Asset Finance

Equipment Finance for Obtaining Additional Assets

- Hire Purchase

- Equipment Leasing

- Finance Leases and Capital Leases

- Operating Leases and Contract Hire

- Secured Lending Against Existing Assets

How to Apply

Intro to Business Asset Finance

Asset finance is a lending mechanism that allows you to obtain cash based on the value of assets you own or that will enable you to get access to assets such as vehicles, machines or equipment. Multiple agreements fall under the asset financing umbrella, and these are:

• Equipment leasing
• Hire purchase
• Finance leasing
• Operating leases
• Asset refinancing

Though asset finance is a general category that covers numerous valuable items in your business, there are only two available types. These are:

• Equipment finance for obtaining additional assets
• Secured lending against existing assets
  
  

Assets can be just about anything in your business. If you’re in the business of haulage, it could be your vehicle fleet, while it could be the refrigerators and ovens in a catering firm. 

As there are many options for alternative lenders, business asset finance is available for just about anything.

Equipment Finance for Obtaining Additional Assets

It is costly to purchase new equipment or machinery in cash upfront. On top of being risky, it is also expensive and can spell disaster for your cash flow. Also, some companies don’t have the working capital necessary for such purchases. This is where equipment finance agreements such as hire purchase, equipment leasing, finance leases, and operating leases come into play.

Business asset finance helps if the business does not have enough working capital.

Hire Purchase

This is one of the most common ways to purchase assets as it allows you to have the asset and pay for it over time. Payments are made in instalments, which means it is a balance sheet item. The maintenance and insurance costs are also yours to bear as the asset is in your possession. You gain full ownership of the item when the payment term concludes.

"With business asset finance, there are many different options for leasing and owning."

Equipment Leasing

A lender purchases an asset and leases it to you in this agreement. This allows you immediate access to the support while only requiring a fraction of the cost upfront. The fraction is usually the first month’s rent.

Leasing is beneficial as it allows for flexibility since you can typically renew your lease, end it, or purchase the item based on your company’s needs.

Business asset finance helps your business hit targets.

Finance Leases and Capital Leases

A finance or capital lease is the middle ground between equipment leasing and hire purchase. The lease here is more long-term and usually carries on for most of an asset’s life.

While you use the asset and pay for it over time, you do not own it, so it does not appear on your balance sheet. You could claim VAT and offset the rental costs against profit, which can be convenient in taxation.

Contract Hire is a method of funding the use of a business asset for a set period of time.

Operating Leases and Contract Hire

This is a more common form of equipment leasing. It is a lease with an agreed term where the lessor takes care of maintenance. It doesn’t appear on your balance sheet, just like finance leases, and it’s cheaper since you don’t need to pay the item's total value.

Secured loans are loans that are secured by a specific form of collateral.

Secured Lending Against Existing Assets

This concept, known as asset refinancing, secures a loan against assets that your company already owns, such as vehicles, buildings, and equipment. Should you fail to keep up with loan payments, the lender seizes the assets to cover the owed.

As you are technically releasing cash from existing assets, the amount you can get is dependent on the value of the assets being used. This type of lending is sometimes used for the consolidation of debt.

While some lenders only refinance assets in a single area, others finance anything with a  verifiable resale value. You can access many asset financing products, but there are also restrictions, such as the fact that the asset must be removable and critical to your operations.

Apply for a Love Finance business asset loan below.

How to Apply

Asset finance agreements are not usually very complex. However, some of the requirements are like those of traditional loans.

Before applying, get an idea of what you need and what you are trying to achieve. Once you have done this, ensure you decide what amount you can commit to and convenient terms.

Ensure that you shop around for an alternative lender source that is legitimate and best able to offer what your business needs.

These agreements typically have prerequisites in the form of documentation, and it is up to you to ensure that you familiarise yourself with said requirements and that you meet them.

Some lenders provide online application methods, while others physically require you to visit a building. Complete your application form correctly and ensure that you understand the terms before signing any contract.

After the contract is signed, delivery of the items or cash is handled based on the lender’s agreement with you. After that, it is up to you to ensure that you meet your end of the contract by making the requisite payments.

Ready to apply for asset finance?

Applying with Love Finance couldn't be easier. Click here to find out how much you could borrow to finance an asset.