What is Asset Finance?
Asset Financing refers to using a company’s balance sheet assets, including short-term investments, inventory and accounts receivable, in order to get a loan.
There are many options available for your business to secure finance against a wide range of assets. With so many asset financing choices, the most appropriate for you will depend upon your business sector, individual circumstance and requirements.
What assets can I use when asset financing?
Below is a list of assets that you may use for security. These include:
- Commercial vehicles and cars
- Buses and coaches
- Business and technology
- Plant and machinery
- Aviation, marine and agriculture
If you’re considering asset finance but not sure if your asset would qualify, our advisers are on hand to answer any questions.
Who can get asset financing?
Asset financing is most suitable for businesses and organisations including sole traders and SMEs, as well as large corporations. Some lenders specialise in certain company types, for example limited companies or public limited companies (PLCs).
How much can I can raise with asset finance?
As with any loan, the limit may change from one lender to the next however, asset financing generally starts at sums as small as £1,000 and may range up to a maximum of £10 million. However, the lender’s decision will be based on how comfortable they feel that the business can afford the repayments.
How long can I get asset financing for?
Typically, asset financing agreements are governed by the lifetime of the asset, especially if it involves the purchase of an additional piece of equipment. This lifetime varies from one asset to the next so if you have any questions, it’s important to talk to our expert team for more information.
It’s important to remember that asset finance is a fixed term contract that cannot be withdrawn over the contract length. Don’t forget that a bank can also call in a business overdraft at any time!
What types of asset financing are available?
At Coreco Commercial we work with specialist lenders to ensure you receive the most suitable product with appropriate advice based on current, expert analysis of the asset.
Also known as ‘lease purchase’, this lets you spread the cost of a purchase over an agreed period. When that period ends, you own the asset. It is an option well-suited to assets with good value retention and long asset life.
Not dissimilar to a hire purchase loan, contract hires set up fixed payments based on an asset’s value and at the end of the term the asset is handed back. It’s a popular choice for the acquisition of a vehicle that is only needed for a specific period of time. While the vehicle wouldn’t be owned, this option usually means both lower deposit levels and monthly repayments than those associated with hire/lease purchase.
With an operating lease, the borrower pays monthly instalments on the value of the lease over the period it is required. They do not necessarily pay the full price of the asset, however, and the lessor usually sells the asset once the term is over. Because the asset is rented with monthly payments, any revenue received from the asset can be directly linked to the rental payments make. This option can be helpful if you need a particular asset to support a specific contract, or for high value specialised equipment (it is often used for aircraft or construction machinery).
Again, here the asset is rented rather than bought, with repayments calculated over an agreed term. While the asset isn’t owned, you are usually able to benefit from an element (if not the majority) of the sale proceeds when the asset is sold at the end of the term .
Aviation and Marine Mortgages
Similar to the standard mortgage we are familiar with, whereby the mortgage is secured against property, in this instance, the security is taken over the aircraft or yacht itself.
Sale and Leaseback
Buying an asset outright ties up the outlaid capital completely, keeping valuable funds locked away from other potential uses. Selling the asset and leasing it back enables your business to benefit not only from the funds released but also from fixed monthly payments and, in some instances, maintenance of the asset can also be included within the monthly repayment. This option puts potentially essential cash back into your business, strengthens your balance sheet, and offers tax benefits, as lease payments can be offset against taxable income.
Please note that with all the above options, security may be required and fees may apply.
For more information please contact our Commercial Finance Division on 020 7220 5100 or click here for more contact options.