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Asset finance is a type of funding that allows you to purchase expensive assets without using up business capital. The term ‘asset finance’ incorporates different types of funding, including hire purchase and refinancing.
The best option for you depends on various factors including whether you want to own the asset when the financing agreement ends. You may also wish to consider whether you have existing assets that you can refinance, which would give you a cash lump sum to make a new purchase.
With so many forms of alternative finance now available to businesses at any stage of their journey, funding a large business asset purchase can be relatively straightforward. So what options might be available to you in this situation?
Hire purchase
A hire purchase agreement incorporates a pre-set number of repayments using a fixed interest rate. This offers the significant benefit of being able to budget effectively whilst also retaining vital business capital.
Hire purchase could be a good financing option for your business if you want to take ownership of the asset ultimately. You can do so with a hire purchase agreement once you‘ve made a completion payment at the end of the contract.
Asset refinancing
If your business already owns one or more expensive assets, you could unlock their value with a refinancing deal. This involves the lender buying the asset from you and then renting it back to your business over a fixed period.
You enjoy uninterrupted use of the asset and can use the money to make a new asset purchase. This is a low-risk option for lenders as they can retain the original asset to recover their money in the event of default, so you may gain access to some favourable terms.
Commercial property finance
Commercial property finance can help you purchase a property for your own business’s use or to rent out to other businesses, using owner-occupier commercial mortgages and commercial investment property mortgages respectively.
Owner-occupier commercial mortgages typically require a deposit of 25 per cent or more. Lenders will also typically look at the loan-to-value ratio, your business’s credit score, the type of property you’re purchasing, and potentially your personal credit rating, before sanctioning commercial property funding.
It’s important not to make too many applications for finance in a short timeframe as it will negatively affect your business credit rating. The safest way to get finance for a large business asset is to approach an experienced commercial finance broker.
UK Business Finance searches the whole of the market to find the best deals for our clients, and there’s no charge for our services. We’ll ensure that you don’t jeopardise your credit score and can even make the application on your behalf. Please get in touch with one of the team to find out more.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What can company finance be used for?
Business finance can be used for a multitude of purposes within a company, from boosting general cash flow to funding development projects and buying stock. Its flexibility and adaptability to an individual business’s needs make it ideal whatever stage of business you’re at.
Management buy-in financing options
If you’re considering being part of a management buy-in (MBI) or you’ve decided to sell your own business to an incoming management team, there are several ways in which the transaction can be financed.
Can I get business finance if my company is insolvent?
If your company is insolvent, it’s vital to stop trading straight away and obtain assistance from a licensed insolvency practitioner. The insolvency practitioner’s role at this point is to assess your company’s financial situation so that they can provide guidance on whether additional finance is appropriate.
Can’t pay company bridging loan – what are my options?
A bridging loan is a form of short-term finance that lasts for up to 12 months. It provides vital funding between transactions when a company purchases one property before the sale of another has been completed.