What is Asset Finance?

There are many things to pay for as a business, from equipment to tools, vehicles to machinery. But should you use your own cash flow to buy them, and what if money was tight and didn’t have it?

This is where asset finance comes in and will help your business.

What Types of Assets Can Be Financed?

Generally speaking, there are categories of assets that can be financed by your business, and that is hard assets or soft assets.

Hard & Soft Assets

As the name suggests, hard assets are physical, high-value items, such as: Machinery, Equipment, Vans, trucks & buses to name a few. With Soft Assets, we’re talking about your IT equipment, software packages and other electronics around the office.

Who Is Asset Finance For?

Asset finance can be used by most Irish Businesses that need to access high-value items but may not be able to buy them upfront.

With that said, we regularly see businesses who can afford to buy what they need upfront, however decide that using asset finance as a tool is the smarter way of doing things so prefer to spread the cost over a longer period.

What Are The Benefits of Asset Finance

So we have quickly covered what it is and who is it for, so now let’s chat about what we in Simplí Business Finance see as the benefits it can bring to your business:

• There are much smaller upfront costs to acquiring an asset. Most lenders in the Irish Market will finance 90% of an asset with you putting in the 10% difference as equity.

• Spread the cost of an asset over time making it more affordable for the business.

• Seasonal payments to suit your cash flow. Most lenders in Ireland will set up a repayment schedule in line with your cash flow through the year.

• Asset finance can be super tax-efficient. You can claim back some of the interest paid so chat to your accountant on how you can do that before committing to a contract.

• It can be a more flexible and cost-effective way of borrowing to grow your business if the use of funds suits the need.
  

What Are the 3 Most Common Types of Asset Finance we see?

• Hire Purchase (or Lease Purchase): This is when a finance provider hires the asset to a business for regular fixed payments with an option to buy ownership for a nominal sum at the end of the payment schedule.

• Finance Lease: This is very similar to hire purchase in the sense that a finance provider is essentially renting the asset to a business through a frequent payment schedule until its cost is repaid. However, you cannot typically take ownership of the equipment at the end of the term like you can on hire purchase.

• Asset Refinancing: This is where a business either offers up an asset as security to release cash into the business or restructure existing borrowings.

My Simplí opinion on Asset Finance:

Asset finance is a finance solution you should be aware of at all times. It’s worth learning about for business owners who want to improve their cash flow. Asset Finance can be a great compliment for anyone looking to capitalise their business in the most efficient way possible. It’s a relative easily got short-term funding solution that delivers long-term gains in your quest for business success.