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 is an affordable, secure means of financing, favoured by companies who want to have the use of equipment, machinery 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 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.
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
SFP Brokers can help in raising the finances for a wide and diverse range of equipment. Here are some of the most common:
Touch Financial is the specialist broking division of the SFP Group.
Set up in 2008, it has become the largest invoice finance brokerage in the UK, winning numerous awards for its service and has assisted thousands of business owners nationwide secure funding.
It is authorised and regulated by the Financial Conduct Authority and prides itself on delivering a high quality service.
If you are a business owner considering invoice finance for the first time, seeking a replacement to an existing invoice finance facility or just looking into alternative funding options to a standard loan or overdraft for your business then contact Touch Financial today for a free consultation about your requirements.