Asset finance gives your business access to the equipment, vehicles, plant, and machinery it needs to carry out its day-to-day activities. It’s a great tool for businesses that are growing and want to maintain a healthy cash flow, especially when faced with unexpected financial challenges.
How does an Asset Finance facility work?
In simple terms, your asset finance provider purchases the asset from your supplier, and you then repay the finance company via a HP or lease agreement. At the end of the agreement, you often have the option to own the asset outright.
But more than that, asset finance can be a great way of helping to manage cash flow and protect the personal interests of business directors.
A recent example of this is a construction business we were asked to work with. Our client operates a fleet of essential vans that are vital to their daily operations. The lease period on 2 of their existing vans had expired, leaving them at a crossroads. Typically, a firm might buy the vehicles outright or renew the lease, but this client had recently suffered a significant bad debt from a contractor. Protecting their remaining cash reserves was essential for the stability of the business.
The client had been offered a new lease elsewhere, but it was expensive and—crucially—required full personal guarantees from the directors. This would have put their personal assets at risk to secure the company’s fleet.
Interested in an Asset Finance facility for your business? Read our Ultimate Guide here.
LendEdge has a panel of lenders which can consider asset finance facility applications from companies of all sizes, even those that have faced recent financial bumps like a bad debt. We discussed the client’s need to keep cash in the business while avoiding personal liability.
We were able to secure a 5-year lease agreement with a supportive finance company that required no personal guarantees.
By restructuring the finance on their existing fleet, the client suffered absolutely no business interruption. There was no need to “swap out” the vans, meaning no time or money was wasted on removing racking, new signage, or reorganising the equipment. The transition was seamless, and the funds that would have been spent on a cash purchase remained in the business as a vital safety net.
Asset finance can be used to purchase brand new or second-hand assets. These can range from ‘hard assets’ such as yellow plant (construction equipment like diggers, crushers, cranes etc.), vans, or manufacturing equipment, through to ‘soft assets’ like IT hardware or office equipment.
You can also use an asset refinance facility to raise cash against equipment, plant, or machinery that you already own. The finance company will simply have the asset valued and will then lend against this valuation. This is a great tool for businesses that have a lot of value tied up in their equipment but need to improve their liquid cash position.
For businesses in the construction sector, an asset finance facility is a vital tool to secure the fleet required without impacting cash flow or requiring directors to sign away personal security.
To find out more about how an asset finance facility can help your business, call Sam Forshaw on 07837 812 145 or email sam@lendedgebf.co.uk to discuss your requirements in more detail.