When is Commercial and Asset Finance the Right Choice?

Commercial and asset finance are forms of business funding that can help you buy the equipment you need to grow sustainably, without over-pressuring your working capital or causing cash flow gaps. It can be used for everything from vehicles, to machinery, kitchen equipment and office furniture, depending on your industry. It’s often a faster option than a bank loan, and can be agreed much quicker. There are a wide range of different finance products on the market including hire purchase, leasing and revolving credit facilities.

Unlike loans that are secured against your property, commercial and asset finance is always backed by a hard business asset like property, machinery or vehicles. This means that you don’t need to put down a large deposit upfront, and it may be possible to secure your business the financing it needs with lower than average interest rates because of the collateral being offered.

As a general rule, whether you operate as a sole trader or partnership, or a limited company, you’ll still need to provide your personal credit score and financial information as well as the details of the assets you are looking to acquire. The lender will want to be assured that your business can afford the regular payments, as failure to do so could result in them repossessing the asset.

When is asset finance the right choice?

Many businesses need to invest in equipment, machines or vehicles to grow. But not every business has the funds to pay for it in one go, and buying expensive items can impact cash flow. With asset finance, you can buy the assets you need and then pay for them over a fixed period, typically with an initial down payment followed by smaller, regular payments (to hire) over what may be the useful life of the asset.

This type of finance is also a good idea for tech industries, where technology can become obsolete quickly, because you only pay for what you need to run your business, and when the term ends you can choose to either buy the asset or return it to the lender. You can also lease assets rather than buy them, which is a popular option for those who aren’t sure how long they will need the equipment or don’t want to commit to an outright purchase.

There are a number of different asset finance options available, and it’s important to look at the fine print to make sure you are aware of all the terms and conditions. The jargon can be dense and complex, so it’s worth seeking advice from financial experts to make sure you fully understand what you are agreeing to before signing any documents. It’s also worth checking out the market to see what different lenders are offering, as there will be some that specialise in particular types of assets, and some that can offer a wider range of finance products. This will be reflected in the interest rates and fees charged, which can vary widely.