What is Asset Finance?
Asset finance consists of a number of alternative solutions that allows your business to purchase, lease or refinance fixed assets ranging from computers to cars. Asset finance is used when you need to invest in new machinery and will effectively put in place a financing structure to spread the cost, which can sometimes be substantial, over a period that the cash flow of the business can afford.
Asset finance can also be utilised where you have existing assets that may have been depreciated quicker than the fall in their value, often leaving unencumbered or lightly financed assets that can be refinanced to provide a cash injection to your business.
What types of Asset Finance are available?
Operating Lease
A very similar product to a Finance Lease in that your business can benefit from the use of a fixed asset without the need to purchase it, against a fixed monthly or quarterly payment. The main difference with an Operating Lease is that the finance company is liable for normal repairs meaning you are able to budget accurately as to the cost of the asset over the term of the lease.
The asset is not shown on your balance sheet and the rental payments are only accounted for through the profit & loss account, effectively making this form of financing off balance sheet.
Finance Lease
Finance lease allow your business to benefit from the use of a fixed asset without the need to purchase it. The finance company will purchase the asset on your behalf before leasing it back to you for set period. At the end of the lease period, the asset is either taken back by the finance company or you can renegotiate a lease of the asset for a further period. Maintenance costs on the asset remain your responsibility during the lease period.
The asset is not shown on your balance sheet and the rental payments are only accounted for through the profit & loss account, effectively making this form of financing off balance sheet.
Hire Purchase
Hire purchase agreements enable your business to purchase fixed assets from the funder for a set monthly fee and generally at a fixed interest rate. You are responsible for making payments on a set payment schedule, normally monthly, and at the end of the Agreement period, the asset will belong to you. All maintenance and repair costs are your responsibility during the HP period.
The asset and the loan will be seen on your balance sheet during the finance period.
Refinance/Sale and Leaseback
Where you have assets that have been depreciated quicker than the value of the asset, or you have existing equipment that has a reasonable level of equity available, it is possible to refinance these assets to raise additional working capital to inject into the business. The nature of the assets will ultimately dictate which route and product solution lenders will be willing to advance through.
Harrisons team of experts have extensive experience in arranging this type of finance. For further information on these or any of our other products and services, complete the Get A Quote, Contact Form or email info@harrisonsfinance.uk.com. Alternatively simply telephone our national rate number 0845 601 5343 or contact your local Harrisons office, details of which can be found within the Contact Us section.
