For many businesses, to grow and become a success it is likely that they will reach a point where they will need to invest funds in vehicles, equipment or perhaps machinery to help them.
But what if you don’t have the funds upfront to buy these all-important items in order to move forward?
This is where asset finance can help. But what is asset finance, how does it work and why might you want to consider it as a financing option for your business?
What is asset finance?
Yet another straight forward named financing option, the idea of asset finance is that you can borrow funds that you need in order to buy assets that are going to help your business in the long run.
The main approach that asset finance takes is that the lender will finance or buy whatever it is that you need, with you paying back a monthly fee over a set period of time to pay the amount back, with interest applied, much like a loan.
Asset financing is often known as lease financing and hire purchase, therefore you can consider either one of these options, depending on the nature of your business and what you need to buy.
What is hire purchasing?
When you take out a hire purchase agreement, you will often be required to make an upfront payment for whatever it is that you wish to purchase.
The rest of the cost of the asset is split down into repayments (with interest) that is paid back monthly for a set period of time.
When the agreement comes to an end, and once the final payment has been made, your business will then own the asset was outright.
What is lease financing?
If you want to pay a lower upfront cost for the asset that you need to buy, then it might be better for you to choose lease financing.
Unlike hire purchase, the lender will still own the asset that you are using, but you as a company, would be paying to use it during the agreement period.
The lender buys the asset in full, you only need to pay a small amount of upfront, then the rest of the amount will be split down throughout the term that you have agreed, with interest applied.
You will need to make regular payments throughout the agreement period.
There may be an option to keep, or extend, the asset at the end of the agreed repayment term, however, you may find that you need to pay an annual rental fee in order to consider this option.
Should I choose hire purchasing or lease financing?
It really does depend on your type of business as to which option you pick.
You need to consider your payment preference, as well as how much money you actually have to spend in the first instance.
Once you know how much you have, then you can weigh up the different options and decide which one is going to be right for your business, not only in the short-term, but in the long-term too.
For asset finance contact us
We can discuss these different types of asset finance to source a solution that meets your needs. Contact The Funding Store today for a quick quote or to discuss the different aspects of these finance options.