What are the different types of Asset Finance and which is best for me?
Asset Finance is available in different forms such as hire purchase or leasing. Fundamentally each just offers a different structure with lower or higher deposits, options to purchase at the end of the agreement or ownership from the start. Our approach is to understand the business need and find the structure that works best. If you have deposit cash available it may make hire purchase more attractive, while leasing can offer lower payments. Tax benefits can be a factor too, hence we like to talk through before committing to an option.
Is my business eligible for Asset Finance?
Asset Finance is simply a credit agreement to purchase an asset. The security of the asset itself gives lenders some protection which can mean less stringent eligibility criteria than unsecured finance. Lenders do like to see some trading history typically and minimum credit scores, but can be flexible if other security can be used such as personal guarantees from a director with good credit. Lenders also need to prove affordability to cover the monthly payments so usually businesses need to show some profit or at least a source of funds to cover the payments.
How much does Asset Finance cost?
Interest rates can range from as low as around 2% up to much higher depending on the business risk. The usual things like business credit score, past and current financial performance, and trading history can all impact the pricing. Sometimes length of term can be more important than interest rate in keeping the monthly cost affordable. A high interest loan with a 5 year term will cost less per month than equivalent low interest loan on a 2 year term.
What assets can be funded?
Assets are typically grouped into ‘hard’ assets (e.g. machinery, vehicles, equipment) and ‘soft’ assets (e.g. furniture, fittings and fixtures). Lenders like to see assets that have a good resale market so vehicles and readily available machinery like tractors or construction machinery are easier to fund than very bespoke or customised equipment. It is always worth having a conversation though, we do work with lenders who can fund things like office furniture and software – every lender has their niches!