Asset finance what types are available?

12th February 2020 Business advice Nicola Roby

Asset finance comes in various forms and deciding which one to go for depends upon your requirements and circumstances.

Hire purchase (HP)

This means purchasing an asset but spreading the cost over a period of time – paying in instalments rather than having to find a lump sum upfront. Following the repayment period, you own the asset. Maintenance and insurance costs are your responsibility.

HP is a straightforward option for assets that you intend to keep for the long term, where you either can’t or don’t wish to pay upfront.

Equipment leasing

Here you rent the item. You pay a monthly amount to lease the asset without the responsibilities of ownership – servicing and maintenance are generally covered.

At the end there is sometimes the option to buy the asset and you may be able to get finance to cover this.

Equipment leasing can be through finance leases or operating leases. A finance lease is similar to HP – you take responsibility for ownership in terms of maintenance and servicing, but you won’t own the equipment. With an operating lease you lease the asset for a fraction of its useful life; essentially you are renting it. You don’t take on the responsibilities of ownership.

This shorter term can offer flexibility, especially if you only need the asset for a short period.

Asset refinance

This involves using assets to raise cash in the form of a loan – releasing the equity tied up in the asset and using the asset as security.

For more advice on what options would meet your business requirements please get in contact.

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