What Exactly Is Asset Finance | How Can I Use It?

What is asset finance?

Asset finance is a type of loan where the borrower gets access his/her assets. These are usually used for purchasing expensive items such as real estate, equipment, vehicles, machinery, furniture, inventory, etc.

Businesses use asset finance to buy high value items. They do this because it helps them save money over time. This allows them to pay less interest and repay the loan faster.

What is an asset?

An asset is anything that adds value to a business – whether it’s money, land, buildings, vehicles, people, intellectual property, customer relationships, etc.

The term “asset management” refers to the process of managing assets within an organization. This includes tracking ownership, maintenance, depreciation, insurance, valuation, and liquidation.

What types of asset financing exist?

There are many different types of “asset finance,” including equity finance, debt financing, and hybrid forms such as mezzanine finance. Equity finance involves buying shares in a company; debt financing involves borrowing money to pay for an asset; and hybrid forms involve both equity and debt.

Asset finance is generally used to finance the purchase or construction of assets. This includes purchasing the asset outright or leasing it out. Assets can include real estate, equipment, machinery, vehicles, buildings, intellectual property, and even intangible assets like brands and patents.

Hire purchase (or lease purchase)

Leasing is a popular way to finance purchases because it allows consumers to pay off the cost over time without having to make payments every month. But what happens when the lease expires? If you decide to keep the item, you could end up paying much more than you originally paid.

If you go into a store and see a product listed as either hire purchase or lease purchase, you might assume that the price includes a monthly payment. However, many retailers offer leases without requiring customers to sign a long-term agreement. This type of financing is known as hire purchase or lease purchase.

The difference between a lease and a hire purchase agreement is simple: A lease requires you to make regular payments throughout the term of the agreement. You don’t own the property until the lease period ends. In contrast, a hire purchase agreement lets you take possession of the vehicle immediately.

So how does this affect you? Let’s say you bought a car under a hire purchase agreement. After three months, you no longer want to use the car. What do you do? Most stores require you to return the car within 30 days of canceling the agreement. At that point, you have to pay the full amount of the original purchase price plus sales tax.

In some cases, you can avoid this problem by simply returning the vehicle early. For example, if you cancel the agreement after one month, you won’t have to pay anything extra.

However, there are exceptions to this rule. Some retailers allow you to extend the length of the agreement beyond the initial terms. If you choose to do this, you must notify the retailer in writing prior to the expiration date.

To help you understand the differences between a lease and a lease purchase, we’ve compiled a list of questions you should ask yourself before signing a lease agreement.

Finance lease (or capital lease)

A finance lease is a form of leasing used by businesses to purchase items such as computers, office furniture, machinery, vehicles, etc. Businesses use finance leases to avoid paying taxes on the interest they receive. Instead, the business pays rent to the leasing company. This allows the business to deduct the rental payments from their income.

The term “finance lease” refers to the fact that the lessee takes possession of the item being purchased, while the lessor retains ownership. In many cases, the lessor gives the lessee a key to the premises, allowing the lessee access to the item without having to sign a contract.

Leases are usually written over a period of one year, although some can be longer. If the lease runs beyond a year, the monthly payment increases each month.

Business owners sometimes mistakenly believe that they must pay tax on the amount paid for the item under a finance lease. However, most states do not require a business to pay tax on the interest portion of a finance lease.

Equipment leasing

Businesses are increasingly turning to equipment leasing as a cost-effective option for purchasing technology. In fact, according to a recent study by JLL, nearly half of companies surveyed plan to lease equipment over the next 12 months. These companies cited several reasons why they chose to lease rather than buy outright. Among those reasons:

• Companies want flexibility in terms of where and how they use the equipment.

• They don’t want to commit to buying something they might later decide they don’t need.

• They’re looking for ways to reduce costs while still getting what they need.

The good news is that leasing offers many benefits beyond just saving money. For example, it helps companies avoid capital expenditures, maintain control over their technology investments, and gain access to cutting-edge technology.

Operating leasing

Leasing companies are responsible for maintenance and repairs during the lease period. At the end of the term, the asset will be either returned to the leasing company or sold.

Asset refinancing

Businesses are increasingly turning to asset financing deals to finance growth. These types of loans are different from traditional bank lending because they use existing assets as collateral. Business owners can choose what type of assets they want to put up as collateral. For example, a restaurant owner could use his equipment or inventory as collateral.

This allows businesses to take advantage of capital markets, where lenders provide money based on the value of the assets being used as collateral. In addition, there are fewer restrictions on how much money can be borrowed.

contract employee (or vehicle asset finance)

Vehicle asset finance is a great way for companies to expand their fleet without having to spend a lot of cash upfront. This type of financing allows you to lease vehicles rather than buy them outright. You pay rent over a period of time, typically 12 months, and you don’t have to make a down payment.

There are many providers offering this type of contract hire or vehicle asset finance, including specialist vehicle leasing companies, banks and financial institutions such as RBS.

For whom is asset financing a wise move?

Asset financing is a great way for small businesses to raise money quickly without needing to go through banks and traditional lending institutions. But there are some things you need to consider before deciding what route to take.

There are several types of asset financing, including leasing, borrowing against them and even selling them outright. You might think of each of these options as being similar, but they’re actually very different. And while each one has advantages, they also come with tradeoffs.

Leasing – Leasing is probably the most common form of asset financing, and it involves renting equipment or property to another party. This allows you to access cash immediately, and you’ll pay rent every month. However, you won’t own the asset, so you’ll still need to make sure it’s properly maintained. If you lease a car, for example, you’d want to make sure it gets regular maintenance.

You can also sell an asset entirely. In fact, if you’ve got a large amount of capital sitting around, you could potentially make a profit by selling it off. Selling an asset like a building, however, requires a fair amount of planning and preparation. First, you’ll need to determine how much you’re willing to sell it for, and then you’ll need to figure out how to market it. Once you do that, you’ll likely need to hire someone to help you prepare the paperwork.

So, which option is best for you depends largely on your situation. Are you looking to acquire a specific piece of equipment? Do you want to invest in real estate? Or maybe you simply want to generate some extra income? Whatever your needs, we hope you found this guide helpful.

Featured asset finance lenders

Asset finance companies offer loans for purchasing property, cars, boats, furniture, household goods and other items. They provide financing for people looking to buy things such as homes, vehicles, boats, motorcycles, commercial properties, agricultural equipment, tools, machinery, office equipment, computers, musical instruments, artworks, jewellery and antiques.

There are many different types of asset finance including hire-purchase, lease purchase, personal contracts plans, secured loans, unsecured loans and refinancing. Some of these companies are regulated by the FCA while others are not.

What is the lowest and highest amount you can borrow with asset finance?

Asset Finance is available for all types of small businesses regardless of size. If you’re looking to borrow money against your assets, such as machinery, equipment, vehicles or buildings, it could be worth considering whether asset finance might work for you. There are different providers offering different products, but generally speaking, there are three main categories of asset finance: secured loans, unsecured loans and equity finance.

Secured Loans – A secured loan involves borrowing money against something of value, such as your car or home. You’ll typically need to provide collateral, such as a vehicle registration document or a mortgage certificate. Secured loans tend to offer better rates and terms than unsecured ones. However, they do require some form of security over the property itself, which may make them unsuitable for certain situations. For example, if you want to use a secured loan to buy a secondhand van, you’d probably struggle to find a lender willing to lend you the money without taking possession of the vehicle.

Unsecured Loans – Unsecured loans don’t involve providing anything of value as collateral. Instead, lenders rely on the creditworthiness of borrowers. This makes them riskier than secured loans, but also potentially cheaper. In addition, because there’s no guarantee that you’ll receive the money back, unsecured loans often come with high interest rates.

Equity Finance – Equity finance allows you to borrow money against shares or other forms of ownership in a business. While equity finance isn’t always suitable for smaller companies, it does allow you to access funding even if you lack collateral. As well as being less risky than secured loans, equity financing tends to be cheaper than both secured and unsecured options.

Minimum Amount – Depending on the product, the minimum amount you can borrow ranges from £1,000 up to £5 million.

Maximum Amount – The maximum amount you can borrow depends on the type of product you choose. Typically, the larger the loan, the lower the interest rate.

How long is the term for asset financing?

Asset finance agreements are used to raise money for businesses looking to purchase equipment, machinery, vehicles, real estate or fixed assets. Banks and other financial institutions provide financing to companies, individuals and governments to fund purchases. These loans usually come with a set term, meaning that the loan must be repaid within a certain period of time. This makes it important to understand how much time you have left on your current loan.

The length of an asset finance arrangement depends on the type of asset being financed, the amount of money required, and the lender’s requirements. For example, a vehicle finance agreement might run for five years, while a commercial property finance deal could be for up to 10 years.

Most lenders will offer a range, including variable interest rates and flexible repayment options. Some lenders even allow borrowers to pay off the loan early without penalty. However, there are some risks associated with taking out an asset finance agreement. If you don’t repay the loan on time, the lender may charge late payment fees or seize the collateral.

What kinds of assets are eligible for financing?

The types of assets you can finance depend on what type of loan you are looking for. If you want to buy a car, you might look into a secured loan; if you want to refinance your home, you could go for an unsecured personal loan. But there are many different types of loans out there, and each one has its pros and cons. Let’s take a closer look at some of the most common types of asset financing.

Secured Loans

A secured loan is where you borrow money against something of value — like a house, car, or even a boat. You use the collateral to secure the loan. When it comes due, you pay off the loan plus interest. Secured loans come in three main varieties:

• A mortgage is a secured loan used to purchase real estate.

• An auto loan is a secured loan used for purchasing cars.

• A credit card debt consolidation loan is a secured loan that allows you to combine multiple debts into one monthly payment.

Unsecured Loans

Hard assets

are assets like factories, warehouses, real estate, equipment, vehicles, etc. They make up most of a company’s value, and they’re often used as collateral. But it’s hard to sell those things because you don’t always know what the market price is. This is where asset finance comes in.

Asset finance allows businesses to borrow money against their assets. In exchange for the loan, lenders receive ownership shares in the company. With asset finance, businesses can use the proceeds to buy new assets or expand existing ones.

This type of financing is popular among startups, since it lets them grow fast without taking out traditional bank loans. Lenders usually require less documentation than banks do, and there are fewer restrictions on how much debt a company can issue.

If you’ve ever wondered why some tech companies seem to have endless amounts of cash, this might explain it. Some of them use asset finance to fund acquisitions, while others use it to fund growth.

Soft assets

are used to describe items such as furniture, equipment, vehicles, etc., that aren’t necessarily physical goods. These items are often sold off after the contract ends.

There are many different ways to go about selling soft assets, including auctioneering them or selling them through brokers. For example, a vehicle might be sold through a car dealer, while a piece of office furniture could be sold through an online marketplace like eBay.

Can second-hand assets be purchased?

Second hand equipment is usually cheaper because it’s been used less frequently. This makes it a great option for those looking to save money while maintaining quality. However, there are some things you need to know about purchasing second-hand equipment.

There are many ways to find information about the history of an asset. You can check online forums, ask friends or colleagues, or even call up the manufacturer directly. If you buy a product from a reputable seller, they will tell you everything you need to know about the item.

If you’re buying second-hand equipment, make sure you look into the item’s history. Ask yourself questions like how long has the item been sitting around? How much use did it see during that time? What kind of maintenance has it seen? Did the previous owner perform any repairs themselves? These are just a few examples of questions you might want to consider asking.

Asset financing’s benefits and drawbacks

Asset Financing is a way of borrowing money against something of value that you already own. This could include assets such as machinery, vehicles, buildings or even land. If you are looking to purchase something that costs thousands of pounds, it might make sense to use asset finance. You won’t need to put down a large deposit up front – just a small amount to show that you’re serious about buying the item.

The main benefit of asset finance is that you don’t need to take out a loan. Instead, you’ll agree a fixed monthly payment over a set period of time. Once the contract ends, you simply return the item and walk away debt free.

There are some downsides though. For example, you won’t be able to sell the item while you still owe money. And if you fail to keep up payments, the lender can either auction off the item or take possession of it. In addition, there’s no guarantee that you’ll receive the same price for the item once it’s sold.

Frequently Asked Questions

What purpose does asset financing serve?

Asset finance is often used to fund the purchase of real estate. This form of financing allows borrowers to borrow money against the value of the property, rather than selling it outright. If you’re looking to buy a house, a mortgage could help you do just that. However, there are many different types of mortgages available, including fixed rate loans, variable rate loans, tracker loans and even equity release plans.

What is asset-based finance?

Asset-based financing is a type of financing where businesses use assets like accounts receivable, inventory and machinery as collateral. This allows them to borrow money against those items.

The process involves three parties: the lender, the borrower and the asset. The lender makes a loan to the borrower based on the value of the asset. The borrower uses the funds to pay off debts, purchase supplies or invest in growth.