What is Asset Finance and Why Use It?

Why Use Asset Finance?

Commercial asset finance products are designed to support investment in, and expansion of your business. Profiled funding through B2B Cashflow Solutions can help you to retain cash in the business and assist your ‘cash cycle’.
Our experience enables us to offset your finance repayments against income generated to offer simple budgeting solutions.
So whichever rental or purchase finance products you choose, the repayments may be spread over ‘useful working life’ of the asset.
Therefore by structuring the finance repayments against the income your asset acquisitions can generate within your business, your key ‘working’ assets become ‘self funding’

Asset finance also offers several benefits when utilised in preference to your bank overdraft or ‘cash in hand’.
Asset finance facilities are not ‘recallable on demand’, and unlike your bank overdraft the interest payments can be fixed at the outset.
‘Risking’ someone else’s money often makes sense, as most businesses have only nominal ‘cash’ reserves, and limited core security to offer against bank facilities including overdrafts and commercial bank loans.
By using asset finance, usually only secured against the specific asset, your ‘cash’ and bank facilities can be preserved for daily working capital or in an emergency.
At the same time, borrowing from a variety of lenders reduces the risk associated with relying on a single funding source and enhances your credit status.

For a better idea of some of the assets we can fund please refer to our home page!

Hire Purchase and Lease Purchase products may be appropriate where you wish to purchase an asset you want to keep beyond the finance contract.

Hire purchase (or lease purchase as it is often known) enables you to acquire assets immediately by paying a mutually agreed deposit, while spreading the balance of the cost over a pre agreed period.

Repayments may therefore be priced and structured at the outset for ease of budgeting.

You would normally pay any applicable invoice VAT on the purchase of the asset (note new and some used cars may not apply), and reclaim part or all of this as appropriate.

There is usually no need for additional security as the finance is secured against the asset.

Title passes to you on satisfactory completion of the terms of the contract, usually requiring payment of a nominal fee at the end.

You can offset the interest element of the finance instalments against your Profit & Loss account throughout the term of the agreement

And claim Capital Allowances against taxable profits as ‘owner’ during the useful working life of the asset.

Fixed and variable rate options are available.

Generally appropriate for VAT registered businesses which have no desire for ownership

These products enable you to acquire use of assets while paying agreed rentals (+ VAT) over the period of the contract.

There is usually no need for additional security as the leasing company retains ownership of the asset.

This differs from ‘ownership’ facilities in so much that the lender (‘Lessor’) pays VAT on the purchase price and claims the Capital Allowances as owner

You (the ‘Lessee’) offset the net VAT rentals against taxable profits (restrictions may apply on cars), and reclaim part or all the VAT element of the rentals as appropriate.

At maturity of the ‘primary’ contract period a lease offers the option to carry on hiring the asset under the terms of a secondary or ‘peppercorn’ rental period for a nominal sum

Or you can sell the asset on behalf of the finance company and retain an agreed percentage of the net VAT sale proceeds.