What is an asset finance provider?

Many businesses struggle to raise enough cash to buy equipment, vehicles and more. Rather than invest their own capital in these vital business assets, many turn to asset finance providers for help. With this method of financing, the cost of a new item is spread over an agreed term in regular payments, with interest and fees included. This allows businesses to avoid paying large lump sums upfront and frees up crucial cash reserves, allowing them to grow.

The term ‘asset finance’ refers to a range of funding methods that involve businesses purchasing assets through a lender. This is typically a bank or financial intermediary, with hire purchase, refinance/capital release and finance lease being common types of assets-based lending. Businesses may also be able to benefit from sale and leaseback and operating lease options too.

Using this kind of financing to access the latest technology or machinery can be an effective way for companies to grow without impacting their cash flow. High-value assets can be used as collateral for loans, so the loan is secured against those assets and repayments are made in fixed monthly amounts over a set period of time. This means that a company can be sure of the amount it will be required to pay, helping them budget more effectively.

For a business that struggles to secure an unsecured loan due to its poor credit rating, asset finance can be an alternative solution. It can allow a company to use its existing high-value assets as security for a business loan and free up cash reserves for investing in other areas of the firm. This method of financing is suitable for all types of businesses, whether they are sole traders, partnerships or limited companies.

Are there any risks involved with asset finance?

There are some drawbacks to this type of financing, including the possibility that if your business fails to meet its repayment obligations, the finance provider may be able to seize the assets it has financed. However, it is important to note that all UK hire purchase and leasing agreements are subject to The Standards of Lending Practice, which guarantees protection for business customers.

In addition, it is worth remembering that the value of assets can depreciate over time. This is why it is often a good idea to take out insurance, which can be taken out alongside an asset finance agreement.

Choosing the right asset finance provider is an important decision. A good provider will be able to guide you through the process, explain the pros and cons of each option and help you to find the best deal. It will also be able to provide you with an accurate picture of your financial situation, so that you can decide which is the most appropriate route for you.