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A No-nonsense Guide For Asset Finance

Asset Finance

If you needed to purchase a necessary but expensive item in your personal life, like a new boiler, you might look at Quidmarket for short term loans.

This way you can fund your emergency even if you don’t have the money yourself.

When running a business, there are options available like this that will allow you to purchase equipment or other high-value items.

These are usually bought using asset finance.

Keep reading to find out more about what asset finance is and how it could benefit your business.

Asset Finance

What Is Asset Finance?

If you needed to buy a new asset for your business, like machinery, you might not have the funding readily available due to its high price.

This is where asset finance comes in.

A business can apply for asset finance and the lender will pay for the equipment and then you’ll pay back a monthly repayment, much like a typical loan.

Some asset finance providers will require you to use other high-value items as collateral in case you’re suddenly unable to make the repayments.

Types Of Asset Finance

There are a number of different types of asset finance, but here are a few of the most popular.

  • Hire Purchase: You might already be familiar with this type of finance in your personal life. Hire purchase is where you lease an asset from a lender and pay them a monthly sum. The ownership of the asset remains with the lender unless at the end of your agreed term you choose to buy the ownership instead.  
  • Equipment Lease: This type of finance relates specifically to the equipment you might need for your business. Like a hire purchase, you’ll borrow the asset from the lender and repay it monthly. You’ll have the options once it’s paid off to either buy ownership, upgrade it, or extend the agreement. One of the benefits of equipment leasing is that the lender is responsible for any maintenance needed, which means you don’t have to spend a penny if it suddenly breaks down.
  • Finance Lease: If you choose this option, you’ll make monthly payments back to the lender for the asset you’ve borrowed. However, once your agreed term is up you don’t have the choice to buy it from the lender. Some lenders might allow you to take a percentage of the asset value if they sell it, but this isn’t always the case.
  • Vehicle Asset Finance: This financing is so you can lease vehicles only. You’ll pay the lender an agreed amount over your leasing term and any problems with the vehicle are dealt with by the lender. You also don’t need to worry about what to do with the vehicles at the end of your lease either, as again the lender will be in charge of the removal.
  • Operating Lease: This type of leasing is similar to standard equipment leasing, except it’s normally over a short period of time. Businesses may find this useful if they need a specific specialist piece of equipment, but only temporarily. This means they don’t need to keep it for years if they only need it for a few months.  
  • Asset Refinancing: There are two common methods of asset refinancing. The first is using an asset as collateral when acquiring a loan. The second is where a business sells an asset to a finance lender, who then leases it back to the business. This way the business receives the financing that they need without losing their asset.

Why Choose It?

Businesses big and small can make use of asset financing, as even the largest companies may not want to pay thousands outright for a piece of equipment.

Using asset financing means that you can help your business grow by supplying it with the assets it needs to succeed.

Some businesses prefer it to a regular loan as the asset is the collateral rather than having to use another part of the business, or even a personal asset.

If you’re working to a budget, it’s easy to incorporate the monthly repayments needed for asset finance too.

It can also take some of the pressure off when using vehicle asset finance as you don’t need to worry about any maintenance costs.

Using asset finance also means that if the item decreases in value, your business won’t be hurt by this, and you haven’t lost out any money by purchasing it outright when it was more expensive.

What Assets Can I Finance?

Assets can be split into soft and hard categories.

Soft assets are items with low durability and a low value once your agreement ends.

This can be things like computer software or furniture.

Once your leasing period is up, the software will not be worth any more than it was originally, and furniture will most likely have decreased due to it now being used.

Hard assets are physical things like vehicles, machinery, and even buildings.

These all have a high value that even has the potential to have increased by the end of your term.

Using asset finance can be useful for businesses that may not want to take out different loans to help get what they need.

You might not have the funding to purchase vehicles and machinery outright, but with asset financing, you could have them both and pay them off monthly.

This option can be useful for smaller businesses too as it can help get your business up and running without adding debt to your account.

Be sure to check out asset financing if you’re thinking of expanding your operations and you’ll be on your way to fully kitting out your business.

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After being forced to shut down my brick and mortar business, I built my online business Be Your Maverick from scratch. Wasted way too much time researching ways to make money online. My mission is to help ambitious individuals cut through the scams and make better informed decisions getting started with an online business.