Asset finance can help you grow your business and expand. It can provide the means to obtain necessary machinery or other equipment in order to win better or bigger contracts without the need to saddle your business with the cost of actually purchasing the assets in question.
Here is a guide to choosing the best asset finance option for your business needs.
Asset finance, such as that provided by Ultimate Finance can be used for vehicles, personal or commercial, equipment, heavy machinery and retail installations, among others. To find out if asset finance is a good fit for your business, consider the following points:
- The amount of capital required to expand your business
- When do cashflow shortages occur?
- How would tax treatment of asset financing affect your business?
- Over what period will you require the asset, and will it require upgrading during that time?
- How rapidly is the industrial technology changing in your sector?
- Do you want to own the asset at the end or return it?
In general, asset finance options are based on hire purchase, technology rentals, chattel mortgages, operating and financial leases. Each of these can be a good fit for particular business circumstances, so getting advice from your financial and tax adviser is crucial before making a final decision.
Hire purchase – you basically hire the asset, and use it over the agreed period. Following the final payment, the asset will belong to you. Typically, you will be able to determine the amount of any initial deposit, monthly payments and the term.
Chattel mortgage – the asset will be yours from day one. The loan you take out is secured using the asset as collateral. Typical terms are 5 years, although you can often select a shorter term if desired. A degree of flexibility is normally permitted, in terms of payments, which can take into account periods of reduced cashflow during the year.
Financial lease – you do not own the asset, but will be responsible for its disposal at the end of the agreed lease term. You get access to the latest machinery or equipment without the need to tie up large capital sums.
Operating lease – you can finance various assets. In many cases, operating lease payments can be treated as trading costs and therefore do not appear as balance sheet liabilities in your accounting. This allows you access to the latest equipment and avoids being stuck with assets which have become obsolete.
Technology lease – in the rapidly changing world of technology it can pay to lease tech equipment as required and reduce the need for large capital investment in items which will be quickly superseded by more up to date technology. Typically, payments and the lease term can be adjusted to take into account the circumstances of your business.