Asset Finance can be a useful way for small businesses to invest in growth
Asset finance. What is it, how is it used and where can you source it? Welcome to our ultimate Guide!
One of the major challenges small business owners face when growing, is how to finance the equipment needed. This could be hard assets such as trucks, plant and machinery, or soft assets such as IT equipment. One of the simplest ways of doing this is to use an asset finance facility. Put simply, this allows a business owner to spread the cost of acquisition over a number of years, rather than having to pay for the asset outright at the start.
Asset finance offers several benefits to businesses looking to acquire assets without purchasing them outright. Here are some key advantages:
- Preserve Cash Flow:
- Liquidity: Asset finance allows businesses to acquire necessary equipment without a large upfront payment, preserving cash flow for other operational needs.
- Budgeting: Predictable payments help businesses plan and manage their budgets more effectively.
- Access to High-Quality Assets:
- Up-to-Date Technology: Businesses can access the latest technology and equipment without the need for substantial capital investment.
- Improved Efficiency: Upgrading to newer, more efficient assets can improve operational efficiency and productivity.
- Tax Benefits:
- Deductions: Lease payments may be tax-deductible as operating expenses, reducing the overall taxable income.
- Depreciation: In some cases, businesses can claim depreciation on financed assets, providing further tax advantages.
- Flexibility:
- Tailored Solutions: Asset finance agreements can be customised to meet the specific needs and cash flow situation of a business.
- Variety of Assets: Different types of assets, such as machinery, vehicles, or IT equipment, can be financed, offering versatility.
- Conservation of Credit Lines:
- Maintain Credit: Asset finance does not typically impact existing credit lines, allowing businesses to retain their borrowing capacity for other purposes.
- Ownership Options:
- End-of-Term Choices: Depending on the type of asset finance, businesses may have the option to purchase the asset at the end of the lease term, return it, or upgrade to a new model.
- Enhanced Financial Planning:
- Predictable Expenses: Regular, fixed payments help businesses forecast expenses and improve financial planning.
- Cost Management: Leasing can include maintenance and service costs, reducing unexpected expenses.
- Improved Balance Sheet:
- Off-Balance-Sheet Financing: Certain types of asset finance can be kept off the balance sheet, improving key financial ratios and enhancing the business’s financial health.
- Risk Management:
- Obsolescence Risk: Leasing transfers the risk of obsolescence to the leasing company, protecting the business from being stuck with outdated equipment.
- Quick Access to Assets:
- Speed: Asset finance agreements can often be arranged more quickly than traditional loans, enabling businesses to acquire needed assets promptly.
A business saved £90k a year with asset finance. Check out our case study here.
Asset finance can be a strategic tool for businesses aiming to optimise their operations, manage finances more effectively, and maintain a competitive edge in their industry. The facilities are often also available for businesses, or business owners, with poor credit files as the financiers main security is overall ownership of the asset.
For more information on how we can hep you source a suitable asset finance facility, get in touch today.