Your business needs access to finance so it can grow. Asset finance can be the solution, but it helps to clearly understand what is involved, especially if you are new to the realm of business borrowing.
Here is an explanation of asset finance and the different ways you can use it:
What is asset finance?
Asset finance helps your businesses access assets and equipment without depleting the funds you need to pay your staff or stay on top of cash flow.
You may wish to use asset finance to buy or lease vehicles, machinery or office equipment. With the help of the right asset finance, your assets can be purchased new, ordered from overseas or bought second hand, depending on your business requirements and budget.
There are three types of asset finance solutions:
- Equipment rental
- Finance leases
- Equipment loans
The assets you finance with an asset finance loan can include construction equipment, imported machinery, office furniture or even coffee machines. No matter how unique or unusual it is, if the asset you have in mind is core to your business, you may be eligible to apply for asset finance.
How asset finance works
Here’s a quick breakdown of how the different types of asset finance can work for your business:
1. Equipment Rental
Your lender will purchase the asset on your behalf, charging you a monthly fee to use it.
When you rent equipment, you can quickly switch to upgraded models.
2. Finance Lease
Your lender will purchase the asset on your behalf. Your business pays a monthly lease amount for a set period, before purchasing the asset outright with the final payment.
Leasing means you don’t have to tie up a large amount of capital in your business assets.
3. Equipment Loans
With an equipment loan, your lender pays the supplier directly on behalf of your business and you take ownership of the asset, making agreed monthly payments.
Taking out a commercial loan means you have full access to your equipment straight away.
How to secure asset finance
If your business has been established for two years and has a good credit history, you may qualify for asset finance.