Asset Finance Guide For Small Business Owners

Asset Finance Guide For Small Business Owners
Photo Credit: Conquer Finance

It can be difficult for businesses to grow and develop without extra funds, which is why business finance is so common. There is a range of financing options you could choose to boost your business, from bank loans to start-up loans and asset financing, to keep your cash flow healthy whilst helping you achieve your goals. If your finances are struggling, a payday loan can help you pay for an unexpected expense when you don’t have the funds available. We’re going to explore one of the most popular types of business funding below, with a guide on asset finance!

What Is Asset Finance?

Asset finance is funding used by a business for a specific asset. It can be used so that businesses can acquire a new asset, or it can be used for finance against an existing one. There are many types of funding and finance that businesses can use like bank loans, small business loans, and merchant cash advances as a way of freeing up cash flow, but asset finance is a little bit different and can be a good option for businesses that need to operate with expensive equipment or machinery. We’ll look at how it can be used in more detail.

What Can It Be Used For?

Many small businesses can find it difficult to fund growth on their own and making an expensive purchase up front could have a detrimental impact on money saved as a safety net, as well as have a negative impact on cash flow. This is where asset financing can come in useful. It means that businesses don’t have to spend a huge lump sum on equipment that they need to operate, which can help them towards development in the future. Many types of asset financing can help a variety of businesses – this type of funding can help when buying IT equipment, heavy machinery, office furniture, or expensive industrial tools. Smaller companies can use this type of finance to kickstart their business and pay for their equipment in affordable repayments, rather than one lump sum.

What Are the Advantages?

Many advantages come with asset finance options such as:

  • A more flexible option: Asset financing tends to be more flexible and operates on an individual basis, which makes it more likely that businesses will be approved. They are not as strict with their approach as banks may be.
  • Affordable: Asset finance companies offer fixed and regular payments so you can easily keep track and meet your repayment conditions, without jeopardizing your business cash flow or savings.
  • Modernize your business: You can choose the most modern equipment with asset financing and when your repayment contract is up, you can give it back and choose the most recent model. This means your equipment will be more reliable, and you can be more productive.

Types of Asset Finance

There are a few different types of asset financing that you can choose depending on your business’s circumstances.

First is a lease agreement – this is when the business chooses to pay for the use of an asset over a certain time frame, they can then decide to give it back to the company or update it to a more modern model when the lease is up. If a business decides it would like to purchase the asset at the end of the term, this can also be agreed upon.

The other type of finance is hire purchase. This is when a business agrees to pay for an asset over a period, and when these payments have been made, the company then owns the asset. With asset finance being one of the most flexible types of loan, you can choose which of these is best for your business so you can reap the benefit.

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