Quite simply Asset Finance is financing of assets or equipment.
Historically this would have meant wheeled assets such as cars, coaches, large pieces of printing equipment or plant and machinery.
Now it covers a broader spectrum where typically security is taken against this asset by the bank so they own the equipment until the finance is paid at which point title is passed to the client.
To expand on the latter it will depend on the type of finance agreement in place as to how title should pass and this is covered in other parts of the website
Assets now encompass a much broader range of equipment which is not exclusive to;
- IT – both hardware and software
- Office Furniture and Fit out
- Plant and Machinery
- Energy related to include Biomass, LED Lights, Heat source pumps
- Print and Copier
- Kitchen and restaurant equipment
- Modular Buildings
- Farming equipment
- Vehicles both commercial (vans, trucks) and personal cars
- Materials Handling such as forklift trucks, warehouse racking
Asset finance is different from other forms of finance as security is usually given in the value of asset being finance although some transactions can be supported by personal guarantees or charges against property.
Why would you finance Assets ?
Well one of the two main reasons are to generate income from that asset or to save money from purchasing the asset.
A new laptop, phone and crm software for a new sales person will generate additional income for the business.
Whilst investing in some Biomass or LED lighting will save the company money in energy costs. In both cases the monthly payments of the finance will be offset against these cost savings or profits meaning the business can gain immediate ROI.
Using cash for these assets would have the same outcome eventually however the ROI is much longer sometimes taking years to recoup costs.
The types of finance agreements vary and will be covered in more detail on another page however this includes;
- Hire Purchase
- Finance Lease
- Operating Lease
- Minimum Term Rental
Tax treatment of each product will be detailed on other pages and qualification should always be sought from an Accountant or Auditor.