Interesting Facts About Asset Finance That You Must Know

While asset finance can be a game-changer for many businesses, it can also contain secrets. While you may think you know everything there is to know about asset finance, the truth is that there’s always more to learn. If you’re new to the concept of asset finance, you might be curious about what it is and how it operates. Let us shed some light on the matter.

Asset finance refers to seeking a loan to purchase an asset needed to run your business operations smoothly. Yet, this type of finance is common but requires keen due diligence and attentiveness.

Whether seeking soft asset finance, heavy finance, or horsebox funding solutions in the UK, the strategies are the same. 

With that said, let’s look at all the factors you need to know when signing off on an asset finance deal.

  • Purpose Of Asset Finance

To successfully apply for asset finance, you must understand both the purpose of the loan and the asset your business needs to operate. Asset finance can be used to acquire essential business assets such as equipment, vehicles, or machinery. A clear idea of what asset you need helps you determine the best type of loan for your business.

  • Type Of Assets 

As mentioned, asset finance caters to various asset requirements, from equipment, and machinery vehicles to horsebox and office furniture. It’s a convenient way to expand your network and ensure you have the necessary tools to operate your business. 

It’s always wise to explore the available options and evaluate your current needs before deciding which asset to acquire. It can help make the process easier and ensure you choose the right asset for your business.

  • Multiple Financing Options

While there’s a range of asset choices, the same goes with the financing modules. As you search for financing options, you may come across Hire Purchase (HP), Finance Lease, Operating Lease, and Asset Resurfacing. 

Each of these modules has different terms, benefits, and levels of flexibility, so choose the one that best aligns with your business goals and budget. 

One of the advantages of these financing options is the flexibility in repayment schedules, which can help businesses maintain stable revenue streams.

  • Preserve Cash Flow

There’s a common misconception that asset finance requires businesses to spend their capital on acquiring assets. However, asset finance enables companies to reserve their capital for other important expenses while spreading the cost of acquiring an asset over its useful life.

It helps businesses maintain their cash flow for other operational expenses. Plus, it allows them to acquire the assets they need to grow and thrive.

  • Provides Tax Benefits

Amongst various official affairs, taxation is one of the most crucial ones. During the tax period, businesses often feel intimidated by the prospect of paying a hefty amount on their assets. 

However, the good news is that companies can claim tax deductions or allowances related to their financed assets. All they need to do is identify the type of asset finance they’ve chosen and align it with the local tax laws.

  • Security For The Loan

When seeking a loan, collateral is often required to secure the money borrowed. However, this can be a challenge for many people who don’t have assets to offer as collateral. That’s where asset finance comes in. 

With asset finance, the asset itself is used as collateral, which means there’s no need to provide additional security. It can be a helpful feature for small businesses with no resources to provide personal guarantees or property against the loan.

  • End Of Agreement 

By the end of the finance agreement, businesses can buy the asset and claim ownership. They may also choose to renew the contract or return the asset, depending on the financing option they have selected. 

For assets subject to heavy depreciation, it may be more beneficial to replace the asset and invest in one with a higher ROI. This practice works well with heavy and soft asset financing in the UK, so it’s a win-win situation. 

Final Thoughts!

Asset finance has revolutionized the financing world with its flexibility and affordability. It’s no wonder businesses are taking advantage of this cutting-edge opportunity. If you haven’t tried it yet, it’s worth considering. By following the above factors, you can expect fruitful outcomes.

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