6 Key Reasons Why Asset Finance Can Help Your Business Grow in 2022
Today we look at why asset finance can help your business grow. 2020 has been a strange year for everyone, to say the least. Both our personal and business lives have been affected in ways no one could have ever predicted. So, where does that leave us for 2021? What prospects do you have for your growing business? How are you able to focus on your business growth in the current climate?
This is where asset finance might be able to help.
Firstly, what is asset finance? Often, the term ‘asset finance’ is associated with the purchase of equipment or goods for a business. This way of financing is used by businesses that want the opportunity to grow, expand, or develop but may not have the funds at hand to do so. This is where asset finance comes into play. By funding a business this way, you are able to spread the cost over a longer period of time, while seeing the benefits relatively quickly.
Businesses are able to use pre-existing assets they already own, such as machinery, vehicles, or technology, as security against loans from asset finance providers. If your business requires the purchase of a new physical asset, an asset finance company will be able to pay for the equipment needed. All you would have to do, as a client, is pay a regular sum of money to the finance provider. Eventually, the items obtained this way will become the property of your business, depending on the contract signed and the agreement with a finance company. Lenders such as Close Brothers, Hitatchi Capital, and Ultimate Finance can help you fund your business in this way.
This all sounds great, right? But what are the key reasons why asset finance can help your business grow in 2021?
- Cash Flow
If cash is king then the way asset finance will help your business is your cash flow. One of the best ways you can channel new or potential investments into your business is through asset finance. Financing your business through assets can help boost your cash flow and allow you to have even more control over your business expenditure.
Whether you are an established business, or just starting out, asset finance can be an invaluable financial product to aid business growth. This flexible and often affordable form of financing has far more benefits than the traditional bank lending schemes usually offer. Asset financing allows your business to use existing assets as collateral – meaning that the cash flow and productivity will increase far more rapidly.
2. Flexibility
With asset finance, comes a world of possibilities and avenues you can go down. Technically speaking, an ‘asset’ can be almost anything, from vehicles for a taxi business to ovens for a catering company. There is a wide range of choices across the market that you can find in asset finance, the choices and options are vast and flexible. Funding Bay works with a host of asset lenders such as Bibby Financial Services, 4Syte, or Funding Circle, each of which provides a variety of asset finance terms.
One of the most popular forms of asset finance agreements is hire purchasing contracts. Hire purchasing contracts give you direct and unlimited access to the assets you need for your business right away. Once you have made a set number of payments agreed upon by your finance company, you will then own the asset in question. Deposits are required for this form of asset financing, but regular payments can be made monthly for up to 6 years prior to the original agreement.
Equipment Leasing
Alternatively, if your company is not interested in owning assets, equipment leasing may be a better option for you. This type of asset financing is also relatively popular, whereby the finance company will agree on a set amount of time for your business to ‘lease’ items and equipment. Although you will never own them, this is a super quick and flexible way for your business to obtain the assets it needs to thrive and set itself apart from the rest.
3. A better understanding of your business
As asset finance tends to be the most popular source of funding, well-established asset finance companies should have a strong understanding of what businesses require when it comes to borrowing money. Experience working with similar businesses means the asset finance company gets to understand your business and can therefore advise on the most appropriate type of finance whilst building a relationship and trust between you.
This compares to other possible ‘alternative finance’ options such as crowdfunding and P2P lending, where often the funders do not know or understand the businesses they are funding and their sole concern is the return generated from their investment. This has a negative effect if there is an issue during the term of the agreement, whereby if there is no relationship held with anyone, it is difficult to know where to go for help, whereas, if dealing with a broker or finance house that knows you, help should be at hand if required.
4. Simple process
A standardized credit procedure means that a business can get a prompt credit decision. This could take as little as 24 hours, providing the agreement is for less than £150,000. Furthermore, because security is often held in the asset itself, additional security usually isn’t required.
Furthermore, By providing extra facilities alongside cash resources and existing bank credit lines, asset finance can offer a quick solution without affecting a business’s current financing arrangements.
6. Quicker funding potential
Working in business, we know that sometimes you need to take advantage of industry opportunities quickly and make decisions that can be approved as soon as possible. Asset finance allows you to have an agreed finance plan far quicker than traditional loans allow. Asset financing can be so quick, that those new assets can be set up and at your disposal within days of confirmation – allowing you to keep one step ahead of your competitors.
Asset financing is one of the most popular forms of financing in the UK, especially in recent years. With 2021 approaching, you will be looking into new ways you can adapt and grow your business – and asset financing may just open new doors you never knew were available. It can be an effective way to ‘take the leap of faith’ without actually taking any major risks that may leave you swimming in debt. Giving yourself access to additional items and equipment puts you miles ahead of your competitors, improves cash flow, and gives every business person the flexibility they need to run a successful business.
7. Tax benefits through capital allowances
‘Capital allowances’ refer to financial deductions available to UK businesses within their financial year and can reduce their liabilities on their corporation tax bill.
These allowances known as ‘Annual Investment Allowances’ are available on a variety of items of equipment, including plant and machinery and vehicles, meaning that businesses taking out certain kinds of asset financing can offset some of the costs incurred against their tax bill. However, these allowances often change each year and it is recommended that you speak to your accountants or financial advisers for more information on this. An in-depth guide to capital allowances is available on the HMRC website.
Get in touch with Funding Bay for assistance with Asset Finance and we will find you the lender best suited to your needs.
