Getting funding to grow your business – asset finance

Andrew Ewing

Andrew Ewing

Corporate Finance Partner

To take your business to the next level it’s likely you’ll need to make a significant investment in a new asset such as investing in new machinery, computer software or equipment or indeed new people.

As a small business the thought of finding the money to make this one off large investment may seem challenging. This is potentially where asset financing can help.

How does asset financing work? 

If you are looking to make a big investment in a piece of equipment or machinery asset finance options such as hire purchase and leasing can make things more affordable in the short term. The key difference between the two being – with leasing you are paying for the use of the item but you don’t necessarily own it, however with hire purchase you own the item at the end of the agreed term.

Alternatively an overall refinance of existing asset finance payments can reduce the cost of finance and mean you only have one affordable payment to make each month.

What are the advantages of asset finance?

Asset finance has some notable advantages – being able to upgrade to better equipment and interest rates are usually fixed and are potentially tax deductible. But there are potential shortcomings to be aware of, for example in some cases you can’t claim capital allowance relief on leased assets under five years and overall you will be paying more money in the long term.

Asset finance links your borrowings to the life of a key asset in your business so you meet the cost over the same timeframe that you receive the benefit of those assets.  This allows you to manage your cash flow more effectively.

At the end of the period of finance you will either own the equipment or can extend the lease or purchase it dependent on your financial position and requirements at that time.

The correct financing solution can have a substantial impact on the success of a business, giving you the funds needed to take that next step. But it’s an important decision to make and professional advice should be sought to ensure you’re embarking on the right path for your business.

Got a question?

If you feel you’d benefit from some assistance reviewing your business goals and funding options, please get in touch with me or another member of the Corporate Finance team for an initial chat.