Asset finance allows companies to gather funds for that purchase of assets they may need to make their businesses run successfully. At times, paying a huge amount of cash previously for buying assets can be really hard to manage. Moreover it might significantly modify the company's capital. With asset finance one can raise the capital to buy assets and the money can be returned towards the finance company through regular payments over an agreed period of time.
Asset finance can be used for purchasing new and used cars, coaches, light and heavy commercial vehicles, plant machinery and equipment for your office. With the help of asset finance solutions, you can buy equipment for your business without having to spend a large sum in one go.
In other words, it saves you from the trouble of getting a large amount of capital for buying much needed assets.
Major Types of Asset Finance Obtainable in the UK
This typical credit facility is readily available where the financier allows the hirer the right to possess and use an asset to acquire regular payments. Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier.
After the hirer pays a deposit of 10-20% towards the finance company, he can take the asset from the supplier. Following a balloon payment is created at the end of the term, the title of the goods is transferred to the hirer.
Lease Purchase is often confused like a regular lease. It is similar to a hire purchase agreement with the only difference being that in a Lease Purchase the hirer needs to pay a deposit of 10-15% like a multiple of the repayments. The payment for the remaining balance and interest is done in instalments.
Moreover, a Lease Purchase agreement is dependant on either a fixed or variable rate. The monthly instalment can be reduced through the inclusion of the balloon.
In Contract Hire, a rental agreement is made between the supplier and also the customer. Here the customer hires the asset for any fixed period of time and after the conclusion of the period, he returns the asset to the supplying dealer. With contract hire, the customer gets the opportunity to use the new asset with no risks related to ownership.
With finance lease, you can get up to 100% finance for that acquisition of plant equipment needed in a business. Here, the ownership of the goods remains with the finance company which rents the products to the hirer on the predetermined period. Initially, the hirer needs to pay the documentation fee as well as an initial payment of a multiple of rentals. The rest of the cost of the asset pays back over the agreed time period.
Here a contract is made to rent the asset for business purposes for a predetermined period. At the expiry from the agreed lease, the asset is either returned towards the financier or an offer to buy it for a mutually agreed prices are made. One major type of difference between a practical lease along with a finance lease would be that the primary rental period for an operating lease does not cover all of the capital costs and also the hire charges.
Looking at these various asset finance, it would not be difficult to choose one for purchasing expensive equipment without forking out a huge sum of money at one go. But it's essential to understand asset finance and it is various types properly before applying for it.
There are lots of finance companies that can help one to get competitive and tailored asset financial methods to suit one's business and personal requirements. It is advisable to take professional help to avoid any kind of complications in the future. One can take the aid of any reputed asset finance based consulting company to get a better deal for one's business.