In order for a business to grow, it is highly likely that asset finance will be required at some point. There are many types of finance packages that are available, thou the two most common are Hire Purchase Agreements and Lease Agreements. Some funding facilities are only available to certain types of businesses, depending on the size of the business or the sector which they operate in. This can prove more difficult for small to medium-sized enterprises or companies that specialise in a particular field. Raising sufficient liquidity in order to purchase a necessary piece of equipment, vehicle or hardware with a lump-sum payment is often a challenge.
Our simple basic guides have been written to provide an overview of products available on the market.
Asset Finance makes an investment much more affordable by breaking down the cost of the investment into manageable monthly payments, which has far less of an impact on cash flow.
In broad terms, asset financing involves the use of a predetermined payment plan (typically between two and five years) in order to procure the necessary services and equipment to keep a business functioning. This allows the business to budget for the monthly repayment, enabling a company to focus upon its core competencies and operations.
Examples of such assets can be manufacturing equipment, agricultural machinery industrial machinery, vehicles or the latest IT systems.
The primary benefits of asset financing are:-
- Enables the purchase of necessary equipment when they are required
- Eliminates the pressure on Cash Flow
- Helps accelerate business growth
It should be emphasised that there are different legalities binding hirers to agreements and these are determined by ‘Regulated Agreements’ or ‘Non Regulated Agreements’.
In simpler terms, the main differences are; Regulated Agreements are for Individuals/Sole Traders,(Consumer Finance) and Non Regulated Agreements are for Limited Companies, LLP’s, Partnerships of 4 or more etc)
See also ‘The Advantages of Asset Financing’