The Advantages of Asset Finance

For growing businesses, having access to a healthy working capital reserve is crucial. Whether it’s to invest in new machinery to keep ahead of the competition, progress with growth plans, or to cover those unplanned expenses. As a business owner, it’s crucial to know that there are financing options available. That’s where asset finance comes in.

Business finance options like asset finance allows business owners to purchase the assets they need, as and when they need them. This works by a lender purchasing an asset on behalf of the business, and the borrower will repay the cash price, including interest, through regular repayments.

When it comes to taking out an asset-based finance facility, there are several advantages:

1.Financing assets can protect your cashflow

Instead of paying for your assets in an upfront lump sum, asset finance allows you to spread the cost over a longer period of time. Repayment is made in smaller, regular monthly payments, making it easier to manage your cash flow without putting your business under unnecessary pressure.

Funding your assets in this way allows business owners to budget for regular costs whilst freeing up funds for working capital. Repayment terms are typically spread between two to five years, often matching the lifecycle of your business equipment. Once the facility is repaid and you’re ready to upgrade your assets, the process can be repeated!

2.More flexibility

Unlike a traditional bank loan, asset finance facilities generally offer more flexibility. This enables business owners to tailor their funding specifically to their circumstances and needs. Asset finance is highly scalable, allowing businesses to access funding as their requirements evolve over time. With an increase in alternative lenders, almost any asset can be financed, ideal for businesses who operate in more niche sectors who require funding for bespoke equipment.

3.Make the most out of your assets

Using asset finance means your business can use equipment and machinery without having to commit to purchasing it upfront, allowing you to use your equipment as you’re paying for it and make sure you start to see a return on your investment from day 1.

4.Tax benefits through capital allowances

The full expensing scheme offers small businesses in the UK the opportunity to claim 100% capital allowances on new commercial vehicles, plant and machinery investments. This allows businesses to deduct the full amount of the asset against tax in the financial year that it’s purchased.

Whilst not covered by the full expensing scheme, you can still purchase used and second-hand assets under the annual investment allowance, which provides 100% first-year relief for plant and machinery investments of up to £1 million. It also includes those bought to lease to someone else, making asset finance an ideal solution to purchase new assets without having to use cash.

5.Preserve your lines of credit

Asset finance doesn’t use up existing credit lines such as overdrafts or credit cards. This helps to ensure that you have a financial safety net in place in case of an emergency. With an increase in alternative lenders who have a strong appetite for supporting UK SMEs, you can open multiple credit lines across a variety of funders, meaning you can continue to invest in and grow your business without limitations.

What assets can be financed?

Asset finance is integral to equipment financing and can be used to fund almost any business asset.

  • New and used commercial vehicles, HGVs, trucks and trailers
  • Plant and machinery including yellow plant, excavators, compactors, waste/recycling and survey equipment
  • Less tangible assets such as vehicle lifts and spray booths, beauty and fitness equipment, IT and security systems and fitouts


What are the most common forms of asset finance?

Depending on the unique requirements and operations of your business, there are a number of funding options when it comes to securing an asset finance facility. Whether it’s to grow your business, purchase new or used equipment or simply keep your cash flow reserves high, asset finance can support you. The two most popular forms of asset finance are hire purchase and finance leasing.

Hire Purchase: A popular form of asset finance agreements are hire purchasing contracts. This type of agreement immediately gives business owners direct and unlimited access to the assets your business needs. Once all agreed upon repayments have been made, you’ll have complete ownership of the asset in question. For this kind of finance facility, deposits are often required but quite often these can be kept to a minimum and VAT can also be deferred.

Finance Lease: An alternative type of asset finance agreement is equipment leasing; often referred to as a finance lease. In theory, the lender purchases the equipment and you will agree on a set amount of time for your business to ‘lease’ the assets. Although you may never have owner of the asset, in most cases title can be arranged at the end of the agreement. Finance leases are a simple, fast and flexible method for your business to obtain the assets it requires to stand apart from the competition and thrive. This type of agreement is ideal for equipment that depreciates in value, as once your lease is coming to an end you can then look at leasing a new make and model.

Apply for Asset Finance

We understand that not all business needs are the same, which is why we have an in-house team of experts with a wealth of knowledge that allows us to facilitate a full-service offering. From unsecured business loans and cash advance to asset refinance, commercial mortgages, and bridging loans.

Our team are dedicated to helping you reach your goals and see your business’ true potential. With strong relationships across our panel of over 150 specialist lenders, we’re confident that we’ll be able to meet your business requirements whilst exceeding your expectations.

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