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ASSET FINANCE: THE SECRET TO BUSINESS GROWTH

Home / News & Opportunities / Member News

Date: 26/05/2017

Business growth is rarely possible without investment; in new kit for expansion, or replacement kit when something breaks. Neither option leaves much room for hanging about.

Cash purchases might seem quicker, but once it’s gone, it’s gone. Investing through asset finance can be as fast as buying for cash and leaves you with cash for unforeseen expenses later on. It’s usually a balancing act between having too much cash at bank (a waste) and too little (a risk). The right choice depends on your business, and its future plans.
 
Hire purchase
If you need the invest right now but would prefer not to pay outright through cash flow then hire purchase (HP) could be the solution. HP could be considered the ‘classic’ asset finance product - it suits SMEs of all sizes that want to end up owning equipment or an investment outright.
Benefit: You own the asset at the end (for a small option to purchase fee)
However: You pay the total VAT upfront (although in some cases you can get a three-month VAT deferment)
 
Finance lease
This are a good option for growing businesses - and any customer who needs to invest but don’t need to own the asset. Similar to Hire Purchase, they spread the cost of the equipment over several years - only you aren’t buying the asset, so you don’t pay VAT upfront; you pay it on each hire payment instead.
Benefit: Good range of options at the end of the lease period (secondary lease, sell it on etc)
However: You’re not able to claim capital allowances on leased equipment.
 
Operating lease (or contract hire)
The truest form of hire - you don’t ever own the asset, but rather you hire it for use. Similar to a finance lease, operating leases often have mileage or usage limits, with maintenance included in the agreement. If you need a relatively short-term lease, or a lease that’s shorter than an asset’s useful life, then these are a good option that’s usually cheaper per month than HP.
Benefit: Clear costs that help with budgeting
However: Can be costly if you exceed usage beyond limits.
 
This list isn’t exhaustive. If none of these match your circumstances then you may need to speak to your broker for more information about other options such as private purchasing or buying at auction. It’s important to remember that for all asset finance, the finance is secured against the asset until repayments are made in full and all fees have been paid.
 
Beacon Asset Finance specialises in securing asset finance to support business growth. For more details visit www.beaconassetfinance.co.uk.