Growing Popularity of Asset Finance

Businesses Turn to Asset Finance for Growth in 2017

The asset finance market continued to grow throughout 2016 as companies were seemingly undeterred by concerns over future economic uncertainty surrounding the UK’s exit from the European Union, and continued to invest for growth in their businesses.

To do so, many companies turned to asset finance as the means of funding essential business assets, to boost working capital or to finance mergers and acquisitions.

Figures from the Finance and Leasing Association show that the asset finance market grew by 5% in 2016 – the sixth consecutive year of growth.

In just one month, some £2.5bn worth of asset finance was provided by FLA members. For the full year, asset finance new business reached £30 billion in 2016 as a whole.

Why is Asset Finance so Popular?

The popularity of asset finance with businesses is down to a number of key operational reasons.

To start with, asset finance is ideal for funding major capital projects, raising finance for mergers and acquisitions or replacing or maintaining depreciating assets such as a new computer system, plant and equipment, machinery or vehicles.

With asset finance, payments can be scheduled into manageable monthly instalments, making the investment more affordable, with less immediate impact on cash flow.

Crucially, it also allows businesses to exploit market opportunities quickly by being able to obtain the equipment and assets required without first having to build up the necessary cash reserves.

It also means that funds do not have to be tied up for long periods in products which have unpredictable resale or residual values, which again helps the cashflow of the business.

At the same time, asset finance offers significant tax benefits as payments are fully tax deductible, while low, fixed payments allow easy budgeting throughout the term of the finance period.

And by employing asset finance, the cost of the purchase can be spread across the life of the asset and in line with the return on investment, thus matching costs to revenue.

Asset finance can also be used to free up cash in existing assets by using a sale and leaseback facility against the pre-agreed value of the assets in question.

Investment Decisions for 2017

Given the buoyant nature of the asset finance market throughout 2016, many companies may now be considering be looking to invest in new assets in 2017 to expand their businesses or maintain a competitive advantage.

Investment decisions should typically start with your finance provider, and independent finance providers often offer better rates of interest or faster turnaround than some of the traditional bank-based finance lines.

An independent broker, like Anglo Scottish for example, can provide solutions to many business finance needs, based around a long pedigree in the asset finance arena.

These can include finance solutions for a whole series of asset classes, such as new vehicles, plant and machinery, IT equipment, printing machinery, agricultural machinery, marine and aviation equipment.

It’s important to discuss the solution that best suits your own business needs before making that final investment decision. This may be to optimise your cash flow, take advantage of short term windfalls, make strategic acquisitions or spread your payments over the longest possible repayment period.

What’s the Best Solution?

Any experienced finance provider, like Anglo Scottish, should be able to draw on their expertise to discuss with you the most suitable finance arrangement from the funding methods available.

And they should also provide a consultative approach which quickly identifies the key needs of your business.

Once these objectives have been clearly identified, your finance provider should work with you to offer the type of asset finance that will help your business do what it needs to do.

Choosing the right provider should give you access to asset finance solutions suitable for a huge array of equipment across a wide array of sectors.

And having that degree of experience and flexibility working for you is truly an asset in its own right, and can help you make the right investment decisions for your business.

Guide to Asset Finance Solutions

To help businesses make better informed investment decisions, Anglo has produced a useful guide to selecting the most appropriate asset finance solution.

asset funding options compared

Click on the image to download the PDF guide

The guide which is available to download here compares and contrasts the main funding options including finance lease, hire and lease purchase, operating lease, contract hire, contract purchase and outright purchase.

It looks at issues around whether an initial deposit required, whether the loan is treated as capital expenditure and whether there are set, regular instalments to be paid.

The guide also looks at the comparative flexibility of each method, whether the contract can be extended or reduced and whether fixed or variable interest rates apply.

The handy guide also explains the responsibilities associated with each main funding method, and considers who will be the overall owner of the asset.

It also looks at who will be responsible for asset servicing and management, and who is liable for the risk associated with the asset.

If you would like more details on how asset finance can work for you, contact the Anglo Scottish team today.

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