Using Asset Finance to Your Advantage

If there is one thing that is true about business finance, is that for every problem, there is a solution. Sometimes, the solution is not as easy to come across as others, but invariably finance problems are a time issue as much as a monetary issue and every business experiences times where cash flow and credit are not working in their favour. The difference between staying in business and a company folding can depend on how long a line of credit will extend before their revenue streams recover. By imaginative use of finance, there are more options available to help business through the tougher times.

Using Asset Finance at the Right Time

Asset finance, like all financial products that charge interest, is something to be used sparingly. When your business purchases a property, machinery or expensive equipment and it uses finance, you will pay interest and it will cost more than the outright purchase cost of the asset. When your business owns property or equipment that has an amount of equity, then it is possible to borrow money against the value of the asset. The asset finance loan is repaid in exactly the same way as any other finance agreement. The decision to use asset finance should only be done when there is a specific need that requires capital and the process of re-financing against the value of important equipment should not take place if a possible loss will put the operational ability of your business at risk. In plain terms, do not refinance if you cannot afford to repay the loan.

Examples of Good Reasons to use Asset Finance

  1. The capital raised will help improve the operational ability of your company.
  2. The money will lead to a more stable future for your company.
  3. You can only access high rate business loans because of a poor or non-existent credit score.

Can Anyone Use Asset Finance?

This very much depends on your current situation. Almost any asset can be security for financing, but you need to be sure that there are not people who are first in line when it comes to debts if your company goes in to receivership. This could be a landlord or pre-existing finance arrangements. Every situation is different so it would be best to talk this through with whoever is arranging your refinancing. Even if there are obstacles to raising capital, providing you have equity in your assets, there is usually a way around the problem.

The Benefits of Asset Financing

  1. Your company can grow quicker because your company value is liquid and you have more working capital.
  2. You will not need a deposit when you refinance as you sometimes would if you were purchasing something for the first time. This means you can use refinancing to purchase equipment that your business needs without waiting to generate a suitable deposit.
  3. Very low rates when compared to many other sources of finance.
  4. You can finance up to 100% of the value of your stock.
  5. Quick to arrange Asset Finance and you have suppliers paid directly.

One of the most important benefits to business owners that are not in the above list is the availability of asset finance. With high street lenders tightening their purse strings despite the government providing more finance to banks with the intention of dispersing it to growing UK companies, every route to secure finance need to be explored. Commercial bridging or invoice factoring are great ways to use money owed ahead of schedule, but when you need that money to keep your business running at capacity, it cannot be spared to help your business expand. Asset finance is the perfect solution if you have equity in assets and a legitimate business need to release the equity.

As with finance of any kind, there is a cost to your business. Where capital is accessible without any help it should always be the first choice. Asset finance is a great solution if finance is the only option remaining.

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