Hard asset finance v Soft asset finance

Can I get finance for hard and soft business assets?

Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.

The distinction between the two types of finance lies in the type of asset to be financed. Both hard asset finance and soft asset finance involve flexible financing products designed to spread the cost of the purchase without using up business capital.

These terms can also relate to refinancing existing hard and soft assets whereby businesses use already owned assets to generate cash for investment purposes or to improve their working capital situation.

What are hard assets and soft assets?

Business assets are generally categorised as hard and soft assets, so what does this mean?

Hard assets

Hard assets include equipment, plant and machinery, vehicles, and property. They’re expensive assets that hold considerable value and typically play a fundamental part in a company’s operations. Refinancing a hard asset already owned by a business typically generates a significant capital sum.

Soft assets

The term ‘soft asset’ incorporates items such as computer equipment, software, and office furniture. Although these are less valuable items in a monetary sense, businesses generally rely on reliable, up-to-date IT infrastructure and office equipment to function effectively and often still need specialist financing to purchase them.

Different types of funding for hard assets and soft assets

Asset finance is a general term that incorporates hire purchase and lease agreements – both are flexible options that spread the cost of assets and don’t use business capital.

Hire purchase agreements for buying hard and soft assets

If you want to take legal ownership of the asset, a hire purchase agreement facilitates this with a ‘completion payment’ that’s made at the end of the agreement. An initial deposit is required with this option, and this is followed by fixed monthly repayments, typically over five or six years.

Lease agreements for acquiring business assets

A lease agreement also offers a fixed repayment schedule and may be more appropriate if you don’t need to own the asset at the end of the arrangement. It can be a good option for hard and soft assets that may need upgrading regularly so you can remain current in your market, as flexibility is built in to a lease contract.

You can typically upgrade the asset and enter into a new lease arrangement once repayments have completed, extend the existing lease, or hand the asset back to the lender.

Whether financing a new hard or soft asset, UK Business Finance can find the best deals by scouring the whole market. We also understand every lender’s requirements so can advise you on your most appropriate options for funding whether you’re considering purchasing new assets or refinancing.

We’re commercial finance brokers with a proven track record of success and there’s no charge for our services. Please get in touch with one of the team so we can provide more insight into hard asset and soft asset financing.