The Benefits of Asset Finance |
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Asset finance affords you many benefits:
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Relate benefits to costs Asset Finance allows you to pay for equipment as you use it and derive benefits. A deposit need not be a prerequisite within asset financing arrangements and you can even finance the VAT on your purchase. No additional security For established companies with financial stability security is normally taken on the asset concerned. However, for new-start businesses or if you are borrowing a large proportion of the asset cost compared to your business balance sheet strength, it is not unusual for personal guarantees or charges on other assets to be required. Conserve cash By spreading the cost of the asset over a pre-agreed term, valuable cash-flow resource is preserved. Terms are typically two to five years, although for equipment with a longer useful working life, facilities can be agreed over a longer term. Unique facility A bank will require you to have an account with it in order to agree a facility. Asset finance on the other hand is a flexible and stand-alone facility that allows you to source the best overall deal. Flexible terms Asset finance contracts can be tailored to fit individual needs. Payments can be individually tailored to your plans with flexible schemes including deferrals, stepped and seasonal repayments. Certainty of payments Most asset finance deals are arranged on a fixed-rate basis, which means you know exactly when and much you are paying each month. Competitive rates Asses finance rates can generally be as competitive as finance rates from banks. Remove maintenance concerns With contract hire you don't have to worry about the unpredictable costs of maintaining assets. Refresh your assets Leasing arrangements as fluid as your ever-changing needs. You can get equipment upgrades or swap old products for new at any stage during or at the end of the agreement. This means you can take advantage of new technology and have full use of the equipment thats best suited your business as it grows. This removes the risk of equipment obsolescence, which is regularly associated with cash purchase. Increase your borrowing power In some cases asset finance can provide off-balance sheet finance. The primary value of off-balance sheet financing, apart from its impact on accounting net income, is its effect on various liquidity and solvency financial ratios such as current ratio, debt-to-equity, and net working capital. Reduce your tax liability The tax and accounting impacts of financing assets demand careful consideration as well. You can reduce your overall tax liability through borrowing or a leasing option, as some or all of the cost is tax deductible as a business operating expense. Your accountant will be able to advise you on what is your best option for your business. |
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