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Asset finance

Asset finance covers a broad array of funding options relating to valuable items owned by your business, whether that’s lending against existing assets or getting additional assets.

What is an asset?

An asset can be pretty much anything – whether that’s a vehicle or a piece of equipment. Depending on your business, what kind of assets you have or need can vary wildly. For example, if you own a removal company, your assets might include a fleet of vans and lorries. Or if you own a catering company, your assets might be several ovens and fridges.

What are the different kinds of asset finance?

Asset finance is a very broad category which includes a number of different types. Here are the main ones along with a brief definition.

Hire purchase

With a hire purchase agreement, you can pay for an asset in instalments. This is the perfect option if you need to buy something but don’t yet have the funds to pay for it in full. Once you’ve finished the repayments, you’ll own the asset.

Equipment leasing

This is similar to a hire purchase agreement but it’s a lot more flexible. With an equipment lease, the lender buys the item and rents it to you for as long as you need it. Once the lease finishes, you can either carry on renting the item, buy it outright for an agreed price, upgrade to a new item on a new lease, or return it.

Finance lease

Finances leases, otherwise known as capital leases, fall in between hire purchase and equipment leases. With a finance lease, you borrow an item and pay for its full value over time, but you never technically own it. As the item doesn’t appear on your balance sheet, you can offset the rental costs against profit and claim back the VAT.

Asset refinancing

The first three types are ideal if there’s an item or piece of equipment which you need. But what if you already have the equipment but need to release funds to help your cash flow? That’s where asset refinancing comes in.

With asset refinancing, you’re effectively unlocking the cash tied up in the assets owned by your business. And one of the main benefits is that you don’t even need to own the asset outright – you can secure the loan against the equity you currently hold.