Asset finance information guide

What is Asset Finance?

There are some key reasons why you should use finance to fund your equipment and machinery purchases. Remember, cash is too valuable to tie up in a depreciating asset!

If you use up your valuable cash reserves to fund capital investment, then it reduces your liquidity (the amount of money which you have at your disposal) and restricts future investment opportunities. Consequently, an increasing number of equipment purchases are funded by using other sources of finance such as asset finance or leasing.

Put simply, Asset Finance is the provision of credit or leasing facilities to aid your acquisition of business assets. Security is primarily taken on the asset concerned and is generally a stand-alone facility. The cost is spread over a period up to the useful life of the asset. Assets that can typically be funded in this fashion are generally of a tangible nature with a readily available resale market. Thus, assets with a slow resale market or high degrees of specialisation are generally better funded by alternative methods.

The Benefits of Asset Finance:

• The cost of the asset can be linked to the income stream it generates.
• Relatively straightforward facility to arrange.
• The rental profile is agreed at inception allowing simple cashflow management.
• Stand-alone facility that leaves other lines of credit intact for working capital.
• Unlike an overdraft, asset finance is generally non-cancelable providing the agreement is maintained correctly.
  

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