Comprehensive guide to Asset Finance products for businesses

Understanding the various asset finance products available can help businesses in sectors like construction, manufacturing, agriculture, transport, and technology make informed decisions about funding their growth.

 

Here’s a breakdown of five key finance solutions: Hire Purchase, Lease Purchase, Operating Lease, Refinance, and Commercial Funding.

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1. Hire Purchase (HP)

Hire Purchase is a straightforward financing solution allowing businesses to spread the cost of acquiring essential assets like vehicles, machinery, or equipment. Instead of an upfront purchase, businesses make fixed monthly payments over a set period. Once the final payment is made, ownership of the asset is transferred to the business.

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• Key Benefits:

  • Immediate use of the asset without a large capital outlay.

  • Fixed instalments for predictable budgeting.

  • Full ownership of the asset at the end of the agreement.

  • Potential tax relief on interest payments and depreciation.

 

Hire Purchase finance is ideal for businesses that prefer ownership of high-value assets and want to spread the cost over time.

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2. Lease Purchase

Lease Purchase is similar to Hire Purchase but includes a balloon payment at the end of the term. This final lump sum lowers the regular monthly payments, making it a more flexible option for cash flow management. It’s a popular choice for acquiring business vehicles or expensive equipment.

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• Key Benefits:

  • Lower monthly payments during the agreement.

  • Ownership of the asset after the final balloon payment.

  • Tax benefits, as the asset will appear on the balance sheet.

  • Flexibility to manage capital and cash flow effectively.

 

Lease Purchase agreements are particularly beneficial for businesses that want to own the asset but prefer more manageable monthly payments.

 

3. Operating Lease

An Operating Lease allows businesses to use an asset over a specific period without ownership. The leasing company retains ownership, and the business pays to use the asset. This is ideal for businesses needing equipment or vehicles for a short-term project or temporary use.

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• Key Benefits:

  • No large upfront payments.

  • Off-balance sheet financing, which doesn’t affect financial liabilities.

  • Freedom to upgrade or return the asset at the end of the lease period.

  • The leasing company assumes the risk of depreciation.

 

Operating Lease finance suits businesses that need temporary access to equipment without the responsibility of ownership or long-term financial commitment.

 

4. Asset Refinance

Asset Refinance, also known as capital release or refinancing, allows businesses to unlock the value of assets they already own. By using assets as collateral, companies can raise working capital to fund growth or manage cash flow, all while continuing to use the assets.

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• Key Benefits:

  • Quick access to capital without selling assets.

  • Flexibility in repayment terms tailored to business needs.

  • Retain full use of the assets while accessing funding.

  • Useful for cash flow management, business expansion, or unexpected expenses.

 

Asset refinance is an effective way for businesses to raise capital using their existing assets, providing a flexible funding solution without taking on new debt.

 

5. Commercial Funding

Commercial Funding covers a wide range of financing options tailored to business needs. This can include commercial mortgages, business loans, invoice financing, or trade finance. Whether a company needs funding for growth, acquisitions, or operational support, commercial finance can be structured to fit specific business objectives.

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• Key Benefits:

  • Customised funding solutions to meet different business needs.

  • Can be used for property acquisition, asset purchases, or working capital.

  • Flexible repayment terms that align with the business’s cash flow cycle.

  • Includes solutions like invoice finance to unlock cash tied up in unpaid invoices.

 

Commercial funding solutions provide businesses with the capital they need to thrive, whether for large-scale investments or everyday operational expenses.​​

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6. Finance Lease

In a Finance Lease, the finance company buys the asset on behalf of the business and leases it to them for an agreed term. The business is responsible for maintaining the asset and will make regular payments for its use. At the end of the lease period, the business can either continue to rent the asset or sell it on behalf of the finance company, usually receiving a portion of the sale proceeds. Ownership does not transfer to the business, but the business benefits from full use of the asset.

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• Key Benefits:

  • The business benefits from the asset without owning it.

  • Potential to share in the sale proceeds at the end of the lease.

  • Off-balance-sheet financing may be possible in certain situations.