Asset finance is one of the easiest ways for a business to buy things that can make a big difference in how productive it is. Asset finance gives a business a hand when it's in trouble so it can keep running and grow. Continue reading to get a clear picture of asset finance.
Asset finance is a way for businesses to get the money they need to buy things they might need for their businesses to run well. It can be hard to handle when you have to pay a lot of cash all at once to buy an asset. It would also have a big impact on the company's working capital. With asset finance, you can get the money you need to buy assets and then pay back the money to the finance company over a set period of time.
Asset finance can be used to buy new and used cars, coaches, light and heavy commercial vehicles, plant machinery, and office equipment. With asset finance solutions, you can buy business equipment without spending a lot of money at once.
In other words, it saves you the trouble of coming up with a lot of money to buy assets that you need.
The most important types of asset financing in the UK
"Hire Purchase" (b>Hire/b>)
This is a common type of credit facility. In exchange for regular payments, the lender gives the borrower the right to own and use an asset. Here, the person who wants to rent the asset first looks for it and talks with the person who wants to sell it about the price.
After the renter gives the finance company a deposit of 10–20%, he can get the asset directly from the supplier. At the end of the term, when the balloon payment is made, the goods belong to the person who hired them.
b>Lease-to-own/b>
People often think that lease-to-own is the same as a regular lease. It's similar to a hire-purchase agreement, with the only difference being that in a Lease Purchase, the renter has to put down 10-15% of the total cost as a deposit. The interest and the rest of the balance are paid off in instalments.
Also, a Lease Purchase agreement can have either a fixed rate or a rate that changes over time. By adding a balloon, the monthly payment can be made less.
Hire on a contract basis
In Contract Hire, the supplier and the customer agree to rent something from each other. Here, the customer rents the asset for a set amount of time, at the end of which he gives it back to the dealer who gave it to him. With contract hire, the customer can use the new item without taking on the risks that come with owning it.
"Finance Leasing"
With a finance lease, a business can get up to 100% of the money it needs to buy the plant equipment it needs. Here, the goods are still owned by the finance company, which rents them to the renter for a set amount of time. At first, the renter has to pay a fee for the paperwork and an initial payment equal to a multiple of rentals. Over the agreed-upon time frame, the rest of the cost of the asset is paid back.
"Operating Lease" (b>/b>)
Here, a deal is made to rent the asset for a set amount of time for business purposes. At the end of the agreed-upon lease, the asset is either given back to the lender or an offer is made to buy it for a price that both parties agree on. One big difference between an operating lease and a finance lease is that the primary rental period for an operating lease does not cover all the capital costs and hire charges.
Taking a look at these different types of asset financing, it wouldn't be hard to pick one that would let you buy expensive equipment without having to pay a lot of money all at once. But you need to know a lot about asset finance and its different types before you apply for it.
There are a lot of finance companies that can help you get competitive and custom asset financing plans that fit your personal and business needs. If you want to avoid problems in the future, it's best to get help from a professional. Any reputable asset finance consulting company can help you get a better deal for your business.
