Asset Finance (3)
28 Jan

8 Facts You Didn't Know About Asset Finance in the UK

The asset finance industry in the UK has expanded greatly over the last few years, but it remains relatively unknown outside of the financial industry. This means that many people in the UK are unfamiliar with asset finance, even though it is a critical part of many business operations, both large and small.

You can find out more about asset finance in the UK by reading our blog post. The information provided in this post will help you to understand what Asset Finance is and how it works. 

8 Quick Facts About Asset Finance in the UK

Here are 8 quick facts about asset finance in the UK that you might not have known before!

1) When do you need asset finance?

If you’re looking to buy expensive equipment, a car or a boat, or even take out a loan against a valuable asset like your home, asset finance is likely your best bet. Typically designed for businesses and organisations that need more than £20,000 of working capital at any one time, these loans are available to both start-ups and established companies.

There’s a good chance an asset finance provider in the UK will approve you, no matter what size business you run: many asset finance providers provide financial services to SMEs (small and medium enterprises), which means they can be flexible with their policies. But make sure you plan ahead when applying for asset finance because there is usually a hefty upfront application fee.

The same goes if you have a bad credit history or don’t own property—there might still be ways around it but it may be harder. Overall, however, asset finance presents a number of advantages over other forms of lending and borrowing – particularly if you want to protect some assets while using others as collateral.

2) What are your options for asset finance?

Leasing means that you are essentially paying for a car in instalments rather than purchasing it outright. This means you don’t have to come up with a huge lump sum at once, which can be a real problem if you don’t have that kind of money lying around.

If you are looking to lease an asset then there are three options available to you: fixed rental contracts, residual value contracts and open-ended rentals. The fixed rental contract is what most people think of when they hear leasing because you will typically have a set number of payments before your ownership rights transfer to another party.

The major benefit to these kinds of agreements is that your monthly payment stays consistent throughout your entire contract so you know how much each month will cost without having to worry about rising prices.

3) What happens if I'm not able to pay my finance back on time?

The finance agreement is what is called hire purchase. This means that if you fail to keep up with your payments you will lose ownership of your asset and it will become theirs. They will be able to sell it as they see fit, either to recover some of their money or even for profit. 

It’s important when entering into such an agreement that you know exactly how much is expected each month and ensure that it won’t put too much stress on your monthly budget. If it becomes too much, then seek help immediately. If you have other payment options available to you then choose these before pursuing asset finance.

4) I need the cash flow now - can asset finance help me?

Asset finance is a great option for businesses looking to raise cash quickly. With asset finance UK, your business can purchase assets and stock at low rates of interest, giving you access to more money than if you were to take out a conventional loan. 

However, it’s not just about immediate cash: many firms use asset finance to pay for assets that are essential for their day-to-day operations. For example, vehicle finance enables people to afford new cars without having to shell out large sums upfront; without asset finance facilities such as these, vehicles would be unaffordable for most people. 

So how does asset finance work? Asset finance companies will provide capital against existing or future assets by issuing loans secured against those assets; once you’ve purchased an asset using asset financing, you have 30 days (or less) to deposit the required funds into an account operated by your lender.

5) What if my client defaults on payments?

Asset finance is a great way to help you get an affordable loan for your next purchase or business opportunity. But what happens if your client defaults on payments? Before you offer asset finance, make sure you understand how asset finance works and know exactly what to do if something goes wrong. 

And before you can start offering asset finance to your clients, remember that they will need to complete credit checks so they are able to access financing. If they fail, it’s best not to offer them a deal at all. 

6) Working capital issues

Many companies don’t have enough working capital to finance their short-term operational costs. If a company has a working capital deficiency, they may find themselves unable to pay for raw materials, or they may struggle to keep up with customer demand because they can’t access funding fast enough. 

Asset finance allows businesses to borrow funds against their assets – meaning that even if there is no money available in their operating account, a business can continue trading without losing out on sales opportunities. 

Asset finance enables more reliable working capital management and growth through increasing your ability to raise cash quickly. These are just some of the many reasons why asset finance Uk is so valuable to an SME in need of quick and flexible financing options.

7) Advantages of asset finance

The advantages of asset finance are that it enables companies to have equipment that would not otherwise be affordable. For example, a particular piece of machinery may cost £100,000 but if arranged correctly with an asset finance company then they can spread payments over three years or even buy outright at a significantly lower rate, depending on each individual case. 

This is because there is already less chance that you will default on loan payments than with any other form of financing such as hire purchase or lease. Asset finance also gives many people access to assets they may never get hold of by increasing cash flow and profit margins and also enabling faster growth.

However, asset finance isn’t just limited to large businesses – many smaller ones use asset finance for things like forklifts or warehouse vehicles enabling them to complete work much more efficiently and hence bring in larger profits.

8) How big is the asset finance market?

There’s no doubt about it; businesses across Britain rely on asset finance to buy commercial property. That makes today’s asset finance market a very exciting place indeed—and one worth taking note of when planning any commercial property portfolio.

A growing number of individuals and businesses want asset finance over other types of loans, which means there has never been more demand for commercial real estate in Britain than there is today. 

Final Thoughts: What Should You Do Next? 

Asset finance is a fantastic way to raise capital for your business. As a small business owner, you may not have heard of it before, but it's available to you if you're ready to make the leap. If you want more information about how asset finance works, or how you can apply for funding, please come to Finance Hub today!