Finance, Investing

What is Asset Finance?

Business Advice | 5 April 2023 | 11 months ago

For most business owners, there will come a time when you want to expand and grow, but this will rely on you being able to scale your offerings and keep up with demand. This usually comes at a cost, especially if you need to buy machinery and vehicles, which isn’t always a possibility if your budget is limited. Luckily, asset finance is an option.

What is Asset Finance?

As a business, it can be difficult to find the money to grow and expand, but asset finance solves this problem. It’s a way of leasing essential equipment, allowing you to scale your business without having to come up with the money first. A business can acquire the things that it needs to grow – such as machinery and vehicles – and pay an agreed amount over a set period of time. This gives you access to the asset quickly, without having to worry about finding the money to buy it outright.

How Does Asset Finance Work?

There is no denying how valuable growing your business can be, but a lot of people are held back by a lack of money. Though you might have the funds to make regular payments for the use of an asset, you might not have enough to cover the upfront cost. Asset finance allows you to pay a set amount over an agreed period of time, rather than paying for the asset before gaining access to it. Hire purchasing a vehicle is an example of this, whereby you purchase a new asset by paying in installments. Another type of asset finance is finance leasing, which involves a leasing firm buying an asset on your behalf, and then renting it to you. Asset refinancing is another example, and this is where you use the asset as security against a loan.

What are the Pros and Cons?

There are a lot of benefits of asset financing, which is why it’s a popular route for businesses to take. It allows you to scale your business quickly by having access to assets that you would not be able to buy otherwise. It’s also a way to use something in the short term, which is flexibility that many businesses would not otherwise have. However, asset financing usually results in you having to pay more for the item overall, compared to if you purchased it outright. This is because you are paying for the privilege of being able to spread the cost.

Sign up to our newsletter to get the latest from Business Advice.

Related Topics

Financial Planning for Small Business Owners
11 September 2023

Financial Planning for Small Business Owners

Read More →
Navigating Financial Challenges: 5 Tips for SMEs
17 August 2023

Navigating Financial Challenges: 5 Tips for SMEs

Read More →
What is Debt Financing?
14 August 2023

What is Debt Financing?

Read More →
What is Straight Line Depreciation and Why is it Important?
11 August 2023

What is Straight Line Depreciation and Why is it Important?

Read More →
Understanding VAT
3 August 2023

Understanding VAT

Read More →
Financial Planning for Small Businesses
2 August 2023

Financial Planning for Small Businesses

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter