4 Advantages of Asset Finance for Small Business
Running a small business can be tough financially as you are constantly attempting to establish and maintain a healthy cash flow, and a profitable company. It is especially tough when you are starting out. Buying assets like vehicles, equipment, and machinery can be difficult when you do not want to use up your working capital. But some of the most expensive items for your company to purchase are also some of the most essential. How do you invest in your company without taking money away from crucial day-to-day operations? Here are some of the advantages of asset finance when it comes to funding your business…
What is Asset Finance?
Asset finance is a means of purchasing the assets – equipment, machinery, vehicles etc. – that your business needs without having to spend the working capital you need to run your business on a day to day basis. With asset finance you make an agreement where a company buys the assets for you, and you pay back the loan under a Leasing agreement or a Hire Purchase agreement. During the period where you pay back the loan you have full use of the piece of equipment or vehicle as if it were your own. At the end of the fixed term, you have the option to buy the item outright by paying a nominal fee. Find out some of the benefits of this form of finance below:
1. Spread Payments for Affordability
Buying an expensive item like a van, truck, machinery set or tractor outright can be prohibitively expensive for the small business, particularly if you want to buy a new item. It can be hard to find the cash for the purchase without taking it away from the money you use to pay suppliers or employees. By spreading the purchase price over a number of years you can more easily afford the item.
2. Less Restrictive than a Loan
Asset finance works in a more flexible way than a personal loan or business loan. You still have full access to the item as you would if you bought it with a personal loan, but you do not have to fulfil as many requirements, and payment terms are often more flexible and beneficial.
3. Budget Effectively with Fixed Payments
By agreeing a set number of payments at set amounts you can plan your budget accordingly. Set payments allow you to understand how you will pay back the money, and won’t leave you any surprises. Depending on your circumstances you decide how much you want to pay back each month, over how many months. Most asset finance deals are set over a one to five year period, much like a loan.
4. Keep Your Options Open
You can decide whether you want to purchase the item outright at the end of the finance agreement. If so, you pay a small amount to buy the asset and then it remains your property. You can also decide to return the item to the lender.
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