Navigating Asset Finance for Small Business Growth

Jun 3, 2016 by

Navigating Asset Finance for Small Business Growth

Small business can make smart use of asset finance and its various benefits to fuel growth and expansion. But how does asset finance work, and is it right for your business? Here’s what you need to know.

Typically, business growth requires serious investment of capital in relation to new equipment, machinery, plant, vehicles, technology or other business assets. But if you’re a new start up enterprise, how can you afford to spend on such assets in order to grow and expand your business?

Asset finance, as provided by Ultimate Finance is the solution. Hire purchase and leasing options provide access to assets which you might not be able to afford to purchase outright.

How does Hire purchase function?

The basics: at the end of the agreed term you own the asset. A deposit of between 10% and 20% is normal. You pay a set monthly sum. You get access to the asset without needing to come up with the full amount upfront. However, you also need to factor in the interest you will pay over the term, which can typically be 25% of the overall value of the asset.

Benefits of hire purchase

  • No need for a bank loan.
  • No collateral or security required.
  • You own the asset at the end of the term. You can sell it and recover some of the investment made in it.
  • Hire purchase payments are tax deductible.

How does leasing function?

The basics: you use the asset, but never own it. Normally there is no need for a deposit. You pay a set monthly sum to use the asset. At the end of the period you can upgrade or replace the asset or simply terminate the agreement. Lease periods are flexible, typically between a month and 24 months. You avoid the need for large capital expenditure upfront, although you never actually own the asset.

Benefits of leasing

  • At the end of the term you can simply terminate it, renew it, or possibly purchase the asset (optional).
  • It is easier to update an asset for the latest version (if this is important) for your business.
  • Leasing often includes all related services such as maintenance, repairs, insurance and replacement in case of breakdown. You are only responsible for the monthly payment.

Being able to access the necessary machinery or equipment which will allow your business to expand and move forward is essential for growth; and asset finance allows you to do this without the need for immediate large capital investment. By spreading the cost of asset acquisition over a longer period, either through hire purchase or leasing options, your business can move ahead confidently.

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