In today’s rapidly changing business environment, securing the necessary capital for growth and expansion can be a significant challenge. Traditional lending avenues such as high street banks can often be restrictive, leaving many businesses searching for alternative solutions. Not ideal when you need to focus your time on running your business! PMD Business Finance offer a plethora of funding options, but one solution that has gained considerable traction is asset finance. This somewhat simple yet effective financing option not only offers flexibility, but also provides businesses with the opportunities they need to thrive in competitive markets.
Enable your business to acquire or use assets
Asset finance is a type of funding that allows your business to acquire and use assets. This includes equipment, vehicles, machinery and even technology, without having to purchase them outright. Instead, your business can spread the cost over a period of time, allowing you to preserve your cashflow and working capital.
This approach to funding is particularly beneficial for SMEs that otherwise may not have the upfront cash available to make large purchases.
Find an asset finance agreement that suits your business needs
It’s not a ‘one size fits all’ when it comes to securing business finance. No two businesses are identical, so understandably your finance requirements are going to be unique too.
Asset finance comes in a variety of forms, each tailored to meet different business needs:
Hire Purchase (HP): This is a popular option whereby a business agrees to pay for an asset in installments over an agreed period. Once all payments are made, title to the asset automatically transfers from the lender to the business.
Finance Lease: With this option, the lender or financing company purchases the asset and lease it to the business for a set period of time. What happens at the end of the term will be dependent on the type of lease agreement you’ve entered into. For this reason, it’s important to fully understand what your options are prior to entering into the agreement.
Operating Lease: Similar to a finance lease, but typically used for assets where you may not have a desire of ownership. The business rents the asset for a fixed period, and at the end of the lease, the asset is returned to the lender. Usually, lenders will set a residual value on the equipment. In turn, this will reduce your monthly repayments throughout the agreement.
Asset Refinance: This allows businesses to release cash tied up in existing assets by selling them to a finance provider and leasing or hiring them back. This can be a useful way to release equity or restructure existing borrowings without losing access to necessary equipment
Improve cashflow and access the most up to date equipment
By spreading the cost of an asset over its useful life, your business can manage its cashflow more effectively. At the same time, you can also ensure it has capital available for other operational needs. This could include staying up to date with the latest technology and equipment without the burden of large upfront costs,. As we know, this is crucial in industries where remaining ahead of the competition is key.
Tax efficiency, flexible repayment structures and preservation of credit lines
Payments made on leasing agreements can often be offset against taxable profits, whilst hire purchase agreements typically see the full cost of the asset offset against taxable profits in the year of investment. Both asset finance options provide a tax-efficient way to finance business growth. However, it’s key for you to understand your individual business circumstances to figure out which is most suitable.
The flexibility of asset finance agreements means that they can be tailored to fit your specific cashflow needs, with options for seasonal payments or balloon payments at the end of the term. Using this type of funding means that existing credit lines remain intact and available for other uses. This is particularly important if your business faces fluctuating funding needs.
In short…
Asset finance is an invaluable tool for businesses looking to grow and expand without the constraints of traditional financing methods. It provides the flexibility, efficiency and access to modern equipment that many businesses need to stay competitive.
With this type of funding facility, security sits within the asset. This makes it a more competitive alternative to funding via traditional bank loans and overdrafts. By utilising asset finance, you can explore new opportunities and continue to succeed in an ever-evolving market landscape.
How can PMD support you with your asset finance requirements?
As NACFB‘s Asset and Leasing Broker of the Year for four years running, it’s safe to say we know our stuff when it comes to hire purchase and leasing. In fact, it’s our bread and butter, and it’s at the core of everything we do.
Considering in securing asset finance to support the growth and operations of your business? Or are you a commercial equipment supplier and want to provide your customers with a flexible funding option? Get in touch with Tom Brown or one of our business finance experts today.