Asset Finance and Equipment Financing Loans Explained

 

 

 


Asset Finance


 

What is Asset Finance ?

Paying cash outright for capital assets can take up a considerable amount of your working capital. With Asset Finance this pressure is eased by allowing you to fund up to 100% of the value of any equipment that you need. This can be anything from Machinery and Tools to Computers and Vehicles.

Asset based lending can even be arranged against less common assets like marine and aviation equipment. Franchises are another where shop fitting and refurbishment can be included in a lease.

Asset Finance is essentially a simple and fast way for business to obtain the funding they need for purchasing assets to run and grow their businesses.

Will I be accepted ?

In general most businesses can qualify for Asset Financing.

The amount you can be eligible for and the interest rate that you pay will depend on the value of the equipment.

Your company financial history and credit history will also be taken into consideration.

That said equipment financing can be a preferred option for those with a less than perfect credit history, as the equipment essentially acts as the loans collateral.

It can be even be said that Asset Finance companies are equally as interested in the quality of the asset in addition to your credit history.

Most clients meet the below criteria…..

Asset Finance

 What Documents do I need to apply ?

See the below list as an example of what may be required for an application…..

Asset Finance Documentation

How does Asset Financing work ?

As the old saying goes it takes money to make money.

Many business owners will find that they just need to get that one piece of equipment that can help them secure a particular deal. Ultimately it’s about growing their business.

Asset Finance or an equipment loan could be the right move for you. It can be used to purchase almost anything.

Particularly….

Machinery, office equipment, company cars, plant hire equipment, computers and tools.

The equipment serves as collateral for the loan. How much you are eligible to borrow will depend on the equipment you are looking to buy. New or used.

The price of the equipment will decide the amount and terms of the equipment financing.

Personal Guarantees may be required here.

Most asset finance loans are agreed at fixed interest rates. Generally these are between 8% and 30% with fixed term lengths, so you can expect to pay the same installment every month.

How long does Asset Financing last ?

Most of the time the term of your equipment loan will depend on the lifetime of the equipment itself. Lenders don’t want to finance something beyond its anticipated lifespan.

These points are key to understanding how Asset Finance terms are decided.

The type of equipment will be factored in to the decision.

The lenders are essentially financing a ‘tangible’ asset that will add value to your business over a period of time.

What is the difference between Equipment Financing and Equipment Leasing ?

The alternative to Equipment Finance is Equipment Leasing.

Both have pros and cons but it is important to remember with a loan you will own the equipment at the end of the term. With Equipment leasing you probably won’t.

Asset Finance for equipment is more for the long term whereas leasing can be seen as a temporary solution.

Some thoughts on Asset Finance.

It’s key to look at your business financials to decide if an equipment loan makes sense, and can add value.

Could you save yourself the cost of equipment finance by spending the cash and not having to think about monthly payments or interest?

Does your cash flow allow for it?

If you can’t afford to buy right now what will be the impact here? Would it mean lost sales and profits in the absence of equipment that could have been financed in the meantime?

These decisions are all decided on a case by case basis and there is no right or wrong answer.

With good planning and guidance, the right piece of equipment should generate more revenue than the cost to you.

What do I do next ?

Capital Investment is critical for most businesses to remain competitive and productive from vehicles to plant and machinery. Not many businesses are aware that IT hardware and software including licensing rights can be funded by asset finance rather than using up vital cash flow.

A full funding proposition including Asset Finance alongside Invoice finance or working capital solutions and commercial mortgages can provide a fit for purpose solution to meet the ambitions of growing businesses wherever you are in the business life cycle.

With access to whole of market lenders and funding providers via our broker contact we can support you through the process from start to finish. All you need to do is phone or complete the online enquiry form to set the ball rolling.

ShortForm Business Consultants Ltd (Company Number 10428423) provide consultancy services on behalf of Empire Commercial Finance Ltd (Company Number 08798534). We are not a Broker or Lender.