The success of your business depends on having the right equipment. However, the upfront costs of new equipment can be a hurdle for many businesses. If you don’t have the financial muscle to cover the upfront costs, asset financing might be the answer to your problems. This type of lending gives you access to business assets such as equipment, technology, machinery, property, etc. Below are some of the benefits of commercial asset finance.
What are the benefits of asset finance?
1. Easier to get than loans
Usually, it is easier to qualify for asset-based financing than a business loan. All your business needs is a track record of profitability and reasonable financial controls. You also need to have assets that can be leveraged, preferably accounts receivable. Invoices make great collateral because they can easily be turned into cash. If you don’t want to use your invoices as collateral, inventory equipment and real estate can be used instead.
2. Improved liquidity
One of the biggest benefits of asset-based financing is improved liquidity. Since there are fewer restrictions on how you can spend the money, asset financing can provide you with predictable cash flow and financial stability during tough economic times.
3. Fixed payments make repayment easier to manage
With asset-based financing, payments are spread out over an agreed term, which frees up working capital. The fixed payments also make it easier to plan for the repayments without compromising your cash flow.
Additionally, a typical term is between two to five years, which is ample time for your business to build a lifecycle for the equipment or machinery to be replaced or upgraded.
4. Failure to pay only results in the loss of assets
Failure to pay a loan often results in the loss of business assets. However, if you default on asset-based financing, the lender will only repossess the acquired asset and nothing more.
5. Tax benefits through capita allowances
UK businesses are legible for financial deductions every financial year. These annual investment allowances help businesses reduce their liabilities on their corporate tax bill and are available on business assets such as equipment, vehicles, and machinery. Therefore, when you take out asset financing, you can offset some of the cost incurred on your tax bill.
Invest in assets – find out more
Asset finance can give you access to business assets such as equipment, technology, machinery and property. Find out more about our business finance solutions or get in touch to see how we can help your business.