Monday 25th May 2020
Asset finance is any form of finance used to fund the purchase of important business assets including equipment, vehicles, machinery or technology. Many businesses require these assets in order to operate but do not have the available cash required to purchase high cost assets. Asset finance is used to bridge this cash shortage and allows a business to grow without the otherwise required capital.
There are many different types of asset finance each with their own pros and cons. This article will examine a major benefit of each of the top 3 forms of asset finance.
A hire purchase involves a business leasing an asset from an asset provider who acquires the asset for the business and then leases it to them. At the end of the lease period the business then owns the asset and no further payments are required. The great thing about hire purchases is that it gives you flexibility as you are able to purchase the asset at any time during the lease period. You are also flexible in your monthly repayments and are able to lower them with a larger payment at the end of the lease period.
With an operating lease ownership of the asset is not transferred over to the business at the end of the lease term. As a result, it is a short term form of asset finance that is more useful for completing projects or contracts. The benefit of an operating lease is that the cost of the lease is only based on the amount of time you wish to use the asset for. This is great for businesses that do not want to use the asset for its lifetime and instead just need it temporarily.
A novated lease allows an employer to lease a vehicle for an employee with the help of a finance provider. The employee is responsible for paying the lease repayments which usually include insurance, fuel and maintenance. The main benefit of a novated lease is the lowering of taxable income, as the employee is able to make the repayment with both before and after tax income.
Asset finance has many benefits that make it worth considering if you need assets for your business.
If you would like to learn more about asset finance and what it can do for you please get in touch with us today.