Asset finance gives your business access to the equipment, vehicles, plant and machinery it needs to carry out it’s day to day activities. It’s a great tool for businesses that are growing and want to maintain a healthy cash flow
How does Asset Finance 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 own the asset outright.
But more than that, asset finance can be a great way of helping to manage cash flow and reduce the costs of operating your business.
A recent example of is a business we were asked to work with. Our client installs fiber optics for large broadband provider. Following a review with one of their advisors, a significant cash drain was identified. Tied into a long term rental contract, they had been spending £9,000 a month or more on renting various vans from a supplier. This monthly spend was restricting their growth plans, and impacting on their monthly cash flow. LendEdge was introduced to the business by their advisor in order to source an asset finance facility. We discussed what sort of vehicles they wanted to purchase and what the future plans are. During this discussion we also found that the business had a number of CCJs, both satisfied and unsatisfied. CCJs being in place meant it was difficult for the client to find a lease agreement themselves.
Interested in Asset Finance for your business? Read our Ultimate Guide here.
LendEdge has a panel of lenders which can consider applications from companies of all sizes, and in all types of final health or distress. We were able to get a credit line agreed with a supportive finance company, which has enabled our client to obtain the first three vans required on a 3 years lease agreement. The first order for three vans was sent to the finance company on Monday, funds were transferred to the vehicle supplier same day, and the vans were delivered by the supplier on Wednesday. Because there is additional headroom in the approved facility, our client will be able to place an order for two more vehicles in the coming days, further reducing the monthly spend on van hire. As the credit line is already in place, there will be no further underwriting required or new documentation. Simply order confirmation and payment can be made.
Once they have obtained their own fleet of vehicles and bought these in house, it is estimated our client will be saving up to £92,000 per year. A huge amount for a small business.
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 gym equipment.
You can also use asset refinance 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. In effect, you are essentially buying the asset off yourself. This is a great tool for businesses that have a lot of assets, but are cash poor.
For businesses that are growing, asset finance is a great tool to secure the equipment or machinery required, without impacting cash flow and having to find lump sums to make purchases. Typical a client only needs to pay the VAT element of the transaction as their deposit for the deal to be completed.
To find out more about how asset finance can help your business, call Sam Forshaw on 07837 812 145 or email sam@lendedgebf.co.uk to discuss your requirements in more detail.