Why businesses should use asset finance
The most important consideration when buying long term assets is whether purchasing it outright is the best use of your hard-earned cash, especially when most assets depreciate in value from day one. By using asset finance, companies can acquire the assets they need to do a job and the profits that are generated can then be used to pay for the asset on an ongoing basis.
So, by using asset finance, companies can retain their cashflow, which would free up capital to invest elsewhere in their business, like workforce or training.
Therefore, in the current financial economic climate, asset finance is a perfect product for companies looking to invest in capital items.
What assets are suitable?
Asset finance can be arranged for most types of business assets. As a guide, if an asset is durable, identifiable and moveable, then it is fundable.
It is suitable for a wide range of organisations from SME’s to large quoted companies.
How are deals structured?
Usually a deposit is required, varying from 1 rental or payment in advance up to 20% (depending on market value), but the average is 3 payments in advance.
Asset finance deals take into account the economic life of the asset - for example, three years for IT hardware and software, and seven years for printing equipment (dependant on age).
Repayment terms are agreed at the outset and can be fixed or floating. Repayment period can be monthly, quarterly or annual.
The rates charged for asset finance depend on the credit strength of the individual company and asset concerned.
What types of asset finance are there?
There are mainly two main types of asset finance products available - Hire Purchase and Finance Lease.
Hire Purchase enables companies to take ownership of the asset at the end of the agreement. They also claim any capital allowances available. Full VAT paid up front with deposit.
With Finance Lease, the leasing company owns the asset & charges a rental payment. At the end of the term, the lease is either extended or the asset is sold with the company retaining most of the sale proceeds. Cashflow friendly because you pay the VAT on monthly payments.
Finally, in summary, there are overwhelming reasons why you should use asset finance over cash, bank loan or overdraft:
- Facilities can be tailored to the asset itself.
- Vital cash reserves are left within the company.
- Tax benefits can be gained.
- An additional line of credit is gained (independent of bank)
To find out how we can help you, call us on 029 2070 7994 or email us on joe@joefizz.com. We’ll help you every step of the way.
We look forward to being of service.
Wayne Evans
Managing Director
Joefizz Asset Finance Ltd
For more information on how we act on behalf of our clients, our payment structures and terms please read our Retail Client Agreement (here).