Use of asset finance shows robust growth
22/01/2015 / Comments 0
A growing number of UK businesses are realising the benefits of asset finance, according to new data.
There was 12% growth in asset finance new business in November 2014, compared with the same month the previous year, the latest figures released by the Finance & Leasing Association (FLA) show.
The figures also revealed that the annual total of new asset finance facilities passed £25 billion for the first time in more than five years.
Compared with November 2013, the data showed robust growth in several asset finance sectors. Plant and machinery finance grew by 14% to £389 million, business equipment finance was up by 25% to £192 million and IT equipment finance increased by 40% to £122 million.
And, with our research showing that businesses that use invoice finance or asset finance are outperforming their peers, we’re not surprised to see increasing numbers of firms taking advantage of asset finance in order to expand their business and move it to the next level.
Here’s a brief overview of some of the asset finance options available and their benefits:
Allows businesses to hire an asset over a fixed period of time in return for regular payments. Once the repayment period of the hire contract is completed, full ownership of the asset is transferred to the business.
- Reduces the impact of an investment on cash flow as the equipment is paid for in manageable instalments
- The interest is typically lower than a bank overdraft or a business loan
- A combination of the above factors allows instant access to equipment carrying a higher specification
- Because the business is treated as the asset’s owner, it is possible to claim capital allowances against tax
Finance lease / Operating lease
These leases are suitable if a business needs a particular piece of equipment for a limited period. Again, the business makes regular payments throughout the duration of the lease, but hands the asset back to the lessor at the end of the repayment period. While maintenance costs are the business’s responsibility with a finance lease, an operating lease sees the responsibility transferred to the asset finance company, meaning the business avoids any unexpected costs.
- Avoid the cash flow complications of purchasing assets outright
- Use the equipment only while you need it, and avoid asset depreciation
- Benefit from fixed monthly repayments to make cash flow management simpler
- Deduct the cost from taxable income as a trading expense
A business can sell its equipment to an asset finance company and lease it back in return for rental payments.
- Provides access to working capital that’s otherwise tied up on the business’ balance sheet
- The cash that is generated can be reinvested into further asset growth
- Repayments are made at a fixed monthly rate to aid the business’ sales ledger management
- Protects the company from asset depreciation
As a commercial finance broker specialising in asset based finance, Hilton-Baird Financial Solutions can introduce the most suitable solution for your business. To find out more about how asset finance could help your business, call our team on 0800 9774833 or email email@example.com.