Asset finance refers to purchasing equipment for your business and paying for this over a fixed amount of time in smaller instalments, rather than paying for it upfront. Whether this comes in the form of lease rental or hire purchase, they both often end up being more cost-effective. Here are our top reasons why asset finance can be more cost-effective than outright purchase.
You get the equipment now
Opting for asset finance rather than an outright purchase means that you are more likely to be able to get the equipment that you need straight away instead of waiting for when the budget allows for it. This means that you can start using the equipment sooner, which may boost productivity within your business and therefore profits. This makes the money-making process much quicker and more effective than waiting to earn enough money in order to buy equipment outright.
You can better manage your cash flow
Asset finance means that you are able to spread the cost of equipment into more manageable, smaller amounts. This means that your cash flow is higher on a monthly basis, with more money kept in the bank. This money can then gain interest or be pumped into other areas of the business that need investment, rather than being lost in one area straight away. In terms of using asset finance for hire purchases, another benefit to your cash flow is that you are not forking out for a piece of equipment that you may only use once – instead, you only pay for it when you need it.
Improved tax efficiency
Asset finance is highly tax-efficient because payments on certain types of asset finance are tax-deductible business expenses. When using asset finance that is spread out quarterly, for example, you are likely to have higher capital allowances to claim, which can be deducted from your yearly profit and are therefore not taxed. This means that through asset finance, you will often see greater amounts of tax relief and be better off in the long term. Click here to see an example of how this works.
Asset finance – where to find out more
Tower offers a full range of finance solutions – products and services aimed at business development and growth. Regardless of how much capital you need or how big you are as a company we can normally help. Our transaction size starts from as a little as £1,000.00 and we have arranged funding facilities for brand new starts ups with little to no trading history to those turning over millions of pounds.