What are the different types of asset finance?

Asset finance is an important tool for small businesses that want to maintain a healthy cash flow. With asset finance, businesses can acquire the necessary tools and resources they need in order to grow without compromising their cash flow. It’s important to understand the different types of asset finance available, so let’s take a look at the different options.

Leasing

Leasing is a popular option among businesses due to its cost-effectiveness. It involves paying for an asset in instalments over an agreed period to a vendor or finance facility. During that time, you make regular payments on the equipment until it’s fully paid off. These are usually paid either monthly or quarterly. At the end of your agreement, you are usually given the option to either renew the lease agreement or purchase the asset outright.

Operating Lease

An operating lease is an agreement that allows businesses to make regular payments for the use of equipment. This type of leasing does not involve ownership but does provide the business with access to the latest technology and equipment needed to run their operations at lower costs.

Operating leases are short-term agreements and generally have lower up-front fees. Along with no obligations or principal payments towards the equipment. Companies can benefit from this leasing arrangement by avoiding extra fees associated with ownership. While being able to get the high performance they need quickly and conveniently.

Asset Refinancing/ Sale and Leaseback

Asset refinancing, AKA sale and leaseback, is a popular and versatile financial tool used by businesses of all sizes. It involves taking an asset that you have purchased within the last 6 months and selling it in exchange for cash. You then use that cash to pay off existing debt or fund future investments for your business.

Therefore, through equipment refinancing you can pay in affordable instalments to use the equipment that you need. This agreement works by your asset being leased back to you over an agreed period of time.

Through asset refinancing, businesses can free up cash flow and access new investments for growth. Read more about sale and leaseback here.

Hire Purchase

Hire purchase is another form of asset finance that involves purchasing an item on finance from a vendor or financial institution with an agreement to pay it off in instalments over an agreed-upon period of time. This type of financing also provides you with ownership rights over the item once it has been fully paid off. Allowing you to use it as collateral if needed.

Invoice Financing

Invoice financing is another type of asset finance offered by many lenders today. This type of financing allows businesses to borrow against unpaid invoices owed by customers and suppliers. Invoice financing allows businesses to access short-term funds quickly in order to cover operational costs while waiting for payment from their customers or suppliers.

Asset finance is a fast and effective approach used by a whole range of businesses in order to acquire necessary assets without compromising cash flow. Understanding and evaluating all your options when it comes to asset finance will help ensure that you get a finance agreement tailored to your business needs. We hope this blog has been of use to you. However, should you have any further questions please don’t hesitate to get in touch.

Get In Touch

From leasing and hire purchase agreements to invoice financing, there are plenty of options available depending on your specific requirements and budget constraints. Get in touch today to explore your leasing and asset finance options with the experts, give us a call on 01494 611 456. Or, send an email to hello@westwon.co.uk

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