Asset finance allows companies to gather funds for the purchase of assets they might need to make their businesses run successfully. Sometimes, paying a huge amount of cash previously for buying assets can be very hard to manage. Moreover it would significantly modify the company's capital. With asset finance one can raise the capital to purchase assets and also the money can be returned to the finance company through regular payments over an agreed period of time.
Asset finance can be used as purchasing used and new cars, coaches, light and heavy commercial vehicles, plant machinery and office equipment. With the help of asset finance solutions, you can purchase equipment for your business without having to spend a large sum all at once.
In other words, it helps you save from the trouble of arranging a large amount of capital for purchasing much needed assets.
Major Kinds of Asset Finance Available in the UK
This typical credit facility is readily available in which the financier allows the hirer the right to possess and use an asset in return for regular payments. Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier.
After the hirer pays a deposit of 10-20% to the finance company, he is able to take the asset from the supplier. After a balloon payment is created at the end of the term, the title of the goods is used in the hirer.
Lease Purchase is usually confused like a regular lease. It's just like a hire purchase agreement using the only difference being that in a Lease Purchase the hirer needs to pay a first deposit of 10-15% as a multiple of the repayments. The payment for that remaining balance and interest rates are done in instalments.
Moreover, a Lease Purchase agreement is dependant on either a fixed or variable rate. The monthly instalment could be reduced through the inclusion of the balloon.
In Contract Hire, accommodations agreement is made between the supplier and also the customer. Here the customer hires the asset for a fixed period of time and after the completion of the period, he returns the asset to the supplying dealer. With contract hire, the customer gets the opportunity to use the new asset with no risks related to ownership.
With finance lease, you can get up to 100% finance for the acquisition of plant equipment required in a business. Here, the ownership from the goods remains using the finance company which rents the goods to the hirer on the predetermined period. Initially, the hirer needs to pay the documentation fee as well as an initial payment of the multiple of rentals. The rest of the cost of the asset is paid back over the agreed period of time.
Here a contract is made to rent the asset for business purposes for any predetermined period. In the expiry from the agreed lease, the asset is either returned towards the financier or perhaps an offer to buy it for any mutually agreed price is made. One major line of difference between a practical lease along with a finance lease would be that the primary rental period for an operating lease doesn't cover all the capital costs and the hire charges.
Taking a look at these various asset finance, it would not be difficult to choose one for buying expensive equipment without forking out an enormous sum of money at one go. But it is essential to understand asset finance and it is various types properly before you apply for it.
There are lots of finance companies that will help one to get competitive and tailored asset financial methods to suit one's personal and business requirements. It is advisable to take professional help to avoid any sort of complications in the future. One can take the aid of any reputed asset finance based consulting company to obtain a better deal for your business.