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Making Finance Easy

05 / 10 / 2016

Matthew Jones – The benefits of asset finance


Amongst many businesses there was historically a perception that asset finance was a secondary funding option, to be used only when your bank said “no”. Today however, according to the Finance & Leasing Association (FLA), asset finance funds around 27% of fixed capital expenditure by UK businesses.

In the 12 months to September 2015, the asset finance industry financed 32.4% of all UK investment in machinery, equipment and purchased software, the FLA revealed. SMEs are able to use asset finance to access funds secured against both new and existing assets, often on more attractive terms than via high street banks. For example, unlike a bank facility, the funding provided cannot be suddenly recalled during an asset finance repayment period, giving additional piece of mind to customers.

Since the recession, legislative (and non-legislative) changes have made bank lending criteria stricter. This has left many businesses which don’t adhere 100% to the new lending requirements struggling to access funding from banks.

But independent lenders will take the time to get to know a business and judge each application on its own merit – there may be a wide variety of reasons why a business does not have a perfect credit history.

All finance companies will have their own lending criteria, but they are usually able to be a lot more flexible in their approach.

A good asset finance provider will take time to understand an asset, its value and crucially what acquiring the asset – or releasing cash from owned assets – will enable a business to do moving forward.

With this understanding, asset finance lenders can often advance larger sums at better rates within shorter timeframes than customers can access via less flexible, traditional bank options.

If these reasons aren’t compelling enough, bear in mind that repayments on your finance agreement can, depending on the type of asset and finance facility used, usually be fully offset against tax, or qualify towards your annual investment allowance.

In simple terms, this means that the taxman himself is contributing towards the cost of your investment!

So, if your business wants to acquire new assets and either does not have sufficient cash reserves to do so outright, simply wants to retain cash for other purposes, or even wants to release cash from owned assets for any reason, consider an experienced asset finance provider as your first port of call.