Asset Finance

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Asset Finance is the third most common source of finance for businesses, after bank overdrafts and loans. It funds around 25% of all fixed capital investment and provides finance to around 20% of all SMEs.

Asset Finance tends to be divided into two main ‘products’ – Leasing and Hire Purchase:

 

Leasing:

Leasing is an affordable, secure means of financing, favoured by companies who want to have the use of equipment, machines or vehicles without ever actually owning them.

Under a leasing agreement, the leasing company (known as the lessor) buys and owns the asset. The customer (or lessee) then hires the asset, and pays a monthly rental over an agreed fixed contract period. At the end of that contract period, the customer usually has a choice of extending the lease, buying the asset or returning it.

Hire Purchase:

Hire Purchase is designed as a method for companies to pay for an asset over time and ultimately own it. Under a Hire Purchase agreement, the customer pays an initial deposit, with the remainder of the balance and interest paid over an agreed period. On completion, ownership of the asset transfers to the customer. As part of the agreement the company will usually also be responsible for the maintenance and repair of the asset.

 

Benefits:

A key benefit of asset financing is that a business can generally claim back the full cost of the lease as a trading expense. Also, for tax reasons, the business is viewed as the owner of the asset and is eligible to claim capital allowance tax.

With the regular nature of payments and with them usually being a set amount, a business is able to better forecast its cashflow. In some instances a business can also see a direct correlation between the revenue generated by the asset and the cost of the repayment

 

Assets for finance

SFP Brokers can help in raising the finances for a wide and diverse range of equipment. Here are some of the most common:

Cars and Vans

Buses and Coaches

Heavy Plant and Machinery

Technology

Haulage