Many of you reading this may be thinking, what on earth is asset finance? Well put simply, asset finance is a way to purchase equipment without taking out a typical loan. Asset finance allows you to spread payments over an agreed period helping you to avoid paying a one-off lump sum for equipment your business might need to grow.
Bank loans are similar to asset finance in terms of being loaned money to fund business expansion. Loans like these are time honoured and reliable methods of financing a small business but banks often only loan money out to businesses with substantial insurance and because of these terms they are very strict.
What are the Advantages of Bank Loans?
Banks loan money to businesses based on the value of the business and its apparent ability to service the loan by meeting the full payments on time. When a bank agrees to a loan the banking staff do not get involved with any aspect of the business. Once the loan has been paid off there is no more involvement with the bank lender unless the borrower wishes to take out a further loan.
Features and Benefits of Asset Finance
The process of securing asset finance is a lot quicker and easier than approaching your bank for a loan.
You can often get asset finance for all types of equipment, from farm vehicles to office kit. This allows you work with an asset company that has expertise and understanding of various sectors and can react quickly to your queries. You can get answers about asset finance relatively quickly. For example, Asset Finance companies can come to a decision as quickly as 3 hours after you put in a request for the equipment finance. Banks tend to take longer to even consider applications let alone agreeing to one.
With asset finance the equipment being financed is the primary security and this means you keep your banking facilities unaffected. On a more practical note, if you plan on using a piece of equipment over a specific time period (5 years for example) why pay for it straight away? You are better off paying for it over a specific time period and use the money you would have saved to invest in your business.
Another massive business benefit asset finance can bring is the tax efficiency. It is possible to offset your monthly repayments to reduce your tax liability and other methods of acquiring equipment such as outright payment do not carry the same level of tax benefits. Interest rates for small business loans can be quite high and often banks cannot lend enough money in order for a business to meet its needs.
Both methods of financing the equipment for your business have their advantages. Overall your business will benefit more from asset finance if you need funding for equipment for your business. The tax benefits and access to new equipment can bring great benefits allowing your business to grow and expand.
Samantha from Portman Asset Finance is a dog loving, baking fanatic and horror film nerd, she is passionate about sharing her suggestions and tips with a wider audience online and enjoys writing articles that reach out to the readers.