What is Asset Finance?
Asset finance is a type of finance agreement that involves the purchasing of equipment by a lender on the behalf of a business. The business then repays the lender over a period, usually between 2 to 7 years. This finance option is mostly utilised by businesses looking to achieve growth, but may not have the working capital to complete an asset purchase, or simply just prefers to spread the cost monthly to protect cash flow.
There are two types of asset finance and depending on the agreement the ownership of the equipment may become the businesses’ once the agreement has been settled.
Another aspect of asset finance is offering the existing business’s owned assets as security for a loan facility, commonly known as refinance. These types of agreements are a way for a business to raise working capital to use as they please.
What Types of Asset Finance are there?
There are two main finance solutions for asset finance. Hire Purchase or Leasing.
Hire Purchase gives the business the option to purchase the equipment immediately after the agreement is settled. In most situations the transfer of ownership happens automatically once the agreement is concluded.
Leasing Agreements work slightly differently and would normally have no option to purchase the equipment as the end of the leasing period. However, as a responsible business finance broker we offer our leasing customers the opportunity to purchase the equipment in a process known as passing title.
We do charge a fee for this. These fees will be agreed upon at the beginning of the contract as part of our commitment to transparent business finance.
Advantages of Using an Asset Finance Broker
There are many different kinds of asset finance. Here are some advantages of this type of finance.
- Asset finance spreads the cost of purchases over a period of up to 7 years.
- Fixed payments make it easy to budget for the costs over the long-term.
- The equipment or asset being purchased acts as the security for the loan.
- Avoids using important capital to make purchases, allowing businesses to use this elsewhere.
- In some cases, asset finance can be provided with no upfront payment.
Asset finance can be a useful alternative to other lending methods such as bank loans or overdrafts, which typically charge higher interest rates.
Asset Finance: Fees and Interest Rates
The great thing about asset finance is that it does not normally attract any lender arrangement fees. Lenders may however charge an administration fee. Interest rates on asset finance are usually lower than business loans due to the asset being used as security, which reduces the risk and gives an incentive to the lender to be more competitive. Average rates for asset finance can be anywhere from 1.75 to 10% depending on the credit rating of the business in question.
Examples of assets that can be financed:
- Commercial Printing Presses
- General Plant & Machinery
- Process Machinery
- Specialist Equipment
- Manufacturing Businesses
- Commercial Kitchens
- Vehicle Fleets
- Agricultural Plant, Machinery, Vehicles
- Prestige Cars
- Health Care
Why Stewart Hindley?
- Access to all lenders
- We are proven asset finance brokers
- We keep you fully updated on progress and work with you through to completion
- We know how to position and package your application and provide a positive outcome
- Our proposals meet lenders’ criteria, helping to reduce delays and speed up applications
- We have an excellent track record with our clients
- We take the time and effort to understand your business and future plans
- We cover the whole of the UK