Is Asset Finance a Good Fit For My Business?
When you want to expand your business or you are looking for a way to finance new acquisitions, one of the options is asset finance. But what exactly is asset finance? And more importantly, is asset finance a good fit for your business? Here we take a look at the pros and cons of asset finance, and find out what you need to do to secure an asset finance deal.
What Exactly is Asset Finance?
An asset finance agreement, for example from a firm like Ultimate Finance, is a way of taking out a loan that allows you to buy or lease the assets you need for your business. Assets could be company cars, computers, office equipment, or machinery. There are different kinds of asset finance agreements – some arrangements allow you to lease equipment through hire purchase agreements, where you own the item after a few years of paying the quotas. Others are leasing agreements where you simply rent the asset and at the end of the deal it is returned to the finance company. Sometimes you can borrow money against the assets you already own, which is a good strategy for a business that may be struggling financially but have a lot of money tied up in assets.
Why is Asset Finance Good for Business?
While bank loans tend to be inflexible and hard to access, asset financing is a more accessible and convenient way to secure the money you need for expensive assets. You can get the assets you need without having to find the money upfront for a lump sum payment. Therefore, you can maintain your regular cashflow and be able to use your assets to expand and grow the business.
In addition, you get access to new, up-to-date equipment and you can upgrade your assets in order to work more productively and effectively. This type of agreement is typically easier to secure than a bank loan, and interest rates are fixed.
Disadvantages of an asset finance deal include the added expense over time – the overall cost of the asset will likely be higher than buying it outright.
How Does Asset Finance Work?
The precise method of asset finance depends on the contract you have. If you are entering into a hire purchase asset finance agreement you will generally have between 12 months and 72 months in which to make fixed payments, after which time the asset will be yours. The payment terms and frequency are set when you set up the deal. If you are getting a leasing arrangement you will pay monthly payments for leasing the asset and at the end of the set time period the asset will be returned.
Image: Image courtesy of Michelle Meiklejohn/ FreeDigitalPhotos.net
http://www.freedigitalphotos.net/images/Finance_g198-Finance_p9130.html