Home – Business Finance Guides – Asset Finance – What is an Asset Finance Facility?
As you know, when you are running a business, getting your hands on the right equipment, vehicles, or technology can be a real game-changer for you, but let us be honest, it is not always cheap to do so.
That’s where an asset finance facility comes in. Instead of paying a big lump sum upfront, you can spread the cost with regular monthly payments, keeping your cash flow in a good place while you do so.
So, whether you are a sole trader, just starting out, a growing limited company, or an established business looking to upgrade, asset finance solutions really do offer you a lot of flexible finance options to suit your exact needs. For instance, these can be used for everything from funding commercial vehicles and IT hardware to even solar panels; you can finance a whole range of assets without tying up your cash.
Consequently, in this guide, we will walk you through exactly what asset finance is, how it works, the different types available to you, and why it might just be the perfect solution for your business.
What is an Asset Finance Facility?
An asset finance facility is a way for businesses to get the equipment, vehicles, or tools they need without having to buy them outright.
Instead of paying the full cost upfront, you instead spread the payments over an agreed period with regular monthly repayments.
It’s a good option for businesses that want to manage their cash flow better while they avoid large upfront costs and still have access to the assets they need to grow.
At the end of the agreement, depending on the type of finance you choose, you then might own the asset, upgrade to something newer, or simply hand it back.
Understanding the Basics of an Asset Finance Facility
An asset finance facility is just a clever way for businesses to obtain the equipment, vehicles, or technology they need without paying a hefty lump sum upfront.
Instead, businesses like yours spread the cost of buying over regular monthly payments, keeping their business’s cash flow healthy.
Find out if Asset & Business Finance is right for you
At Business Finance, we make asset finance simple and stress-free. No more worrying about finding the right ideal — we do all the hard work for you. Our team is here to secure the best finance option that suits your business needs.
Want to know how much you could borrow and what your monthly repayments might be?
No problem, Get in touch with our friendly team today, and we’ll be happy to help.
How Does an Asset Finance Facility Actually Work?
An Asset Finance Facility works by giving you access to flexible payment terms, a variety of finance options, and the chance to then either own or return the asset at the end of your contract.
This makes it ideal for business needs of all sizes — from sole traders to public sector organisations.
For instance, these tend to work by:
The Loan Process Step-by-Step
First, you choose the type of asset finance that suits your business needs — whether it’s equipment leasing, hire purchase agreements, or an operating lease. If you are unsure at this stage, then our expert finance team is on hand to help run you through your options.
Then, once you have agreed with an asset finance provider on the value of the asset and the lease term, you will sign an agreement.
You will then make monthly repayments or monthly instalments, typically through your business account and your online banking platform.
Then, once the agreed term ends, depending on the deal you have taken out, you might own the asset outright, return it, or upgrade to the latest equipment.
Expected Typical Terms and Conditions
Terms here will vary depending on the finance company, the type of asset finance, and the asset itself.
For example, Some deals here will be able to offer you lower interest rates for established businesses with good credit ratings, while others might focus on early-stage companies with growth potential.
You should also note any maintenance costs, lump sum final payments, and your responsibility regarding the ownership of the asset before signing them as well.
What Are The Types of Asset Finance Facilities That Are Available?
There are several types of Asset Finance Facilities that are available, with these consisting of:
Hire Purchase Agreements
With a hire purchase agreement, this allows you to spread the cost of buying a high-value asset, such as industrial equipment or commercial vehicles, over time.
Then, after paying all instalments and sometimes a final fee, your business will own the asset outright.
Equipment Leasing Options
Equipment leasing then lets businesses rent equipment like IT hardware, solar panels, or office furniture for a set period.
You then make regular rental payments and return or upgrade the item at the end of the contract — which is perfect if you want the use of the asset without ownership.
Operating Lease vs. Finance Lease
With an operating lease, you then use the asset for part of its life, usually with lower monthly payments than when deciding to purchase it outright.
A finance lease is closer to full ownership, where you cover almost the entire value of the asset over the lease term, but at the end of the agreement, you hand the asset back to the finance company and do not need to worry about any depreciation costs.
What Are The Benefits of Using an Asset Finance Facility?
There are several benefits here, including, for instance:
Cash Flow Preservation
Here, you can spread the costs over time, which will then allow your business’s cash flow to stay healthy.
Instead of high upfront costs as well, you can keep your cash handy for other areas of the business.
Faster Access to High-Value Assets
Instead of waiting to save a lump sum through your business, you can start using new assets or high-value equipment immediately – gaining a competitive edge over your competitors as a result.
Tax Advantages
In many cases, monthly repayments are classed as business expenses, meaning you can then enjoy tax relief under Financial Services rules.
What Are Some Common Assets Financed Through Asset Facilities?
When it comes to the types of assets we see that are financed through their type of financing, here you have:
Vehicles and Transport Equipment
Vehicle asset finance is popular for people looking for logistics finance and for those who want to buy commercial vans, lorries, and electric vehicles to help you keep your logistics and deliveries running smoothly.
Machinery and Heavy Equipment
IT Infrastructure and Technology Assets
From those looking for IT hardware finance to help them fund cutting-edge software, businesses often use asset finance to access the latest tech without impacting their business cash flow in doing so as well.
Who Can Benefit From an Asset Finance Facility?
Pretty much any type of business can benefit from this type of funding, including, for instance:
Small and Medium Enterprises (SMEs)
SMEs tend to love asset finance solutions because they offer different ways for them to grow, all without risking all their capital upfront.
Large Corporations
Bigger businesses also tend to use asset-based lending on a frequent basis to keep expanding while maintaining flexibility across different types of asset finance.
Key Things to Consider Before Choosing an Asset Finance Facility?
There are several main areas for you to consider before settling on this type of finance, and if you are unsure about which one is right for you, our business finance team is on hand to help you as well.
However, these can consist of:
- Interest Rates and Fees
- Asset Depreciation Impact
- Repayment Flexibility
- Asset Repossession
- Credit Rating
- Over-Commitment Risks
It’s tempting to lease lots of shiny new equipment, but over-committing can cause financial difficulty in slower months. So, you should always make sure you understand the contract you are getting into ahead of time and what your obligations will be.
Is An asset finance Facility suitable for start-ups?
Many early-stage businesses find it a lifeline to access business-critical assets without upfront strain.
How long does approval take?
It can be surprisingly quick! Some lenders approve within 24-48 hours, depending on the application process.
What happens if I default on payments?
You could lose the asset, and your credit rating may be hit, so always check repayment options carefully.
Can I upgrade assets mid-contract?
Some agreements allow upgrading — which is really good if your business outgrows the original asset.
Are there hidden fees in asset finance facilities?
You should always check the fine print for interest payments, administration fees, and possible early repayment charges, and our team will talk you through the process as well.
So, Is an Asset Finance Facility Right for Your Business?
In short — if you want access to a range of assets without draining your working capital, using an asset finance facility could be the perfect funding option for you here.
Whether you are eyeing the latest equipment finance products, investing in solar panels or heat pumps, or needing smart financing options for your business owner, there are plenty of advantages of asset finance to explore to help you find the right one for your requirements.
But, always remember to work with a reliable asset finance broker regulated by the Financial Conduct Authority, like we are, and you will find a world of flexible financial products ready to help your business soar.
Find out if Asset or Business Finance is right for you
At Business Finance, we make asset finance simple and stress-free. No more worrying about finding the right ideal — we do all the hard work for you. Our team is here to secure the best finance option that suits your business needs.
If you liked this Comprehensive Guide to Asset Finance in the UK, and you now want to know how much you could borrow and what your monthly repayments might be?
No problem, get in touch with our friendly team today, and we’ll be happy to help.
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