The Benefits of Asset Finance Over Traditional Loans

If your business needs to gain access to costly assets such as machinery, vehicles or soft assets, there are a number of finance options at your disposal. Often, businesses in this position are quick to turn to traditional forms of commercial finance, such as a traditional bank loan or borrowing money from a third party.

However, asset finance may be better suited to a company in your specific position. At Anglo Scottish, we’re proud to provide a range of different asset finance agreements, with a range of lending criteria, tailored to your needs. These range from an operating lease to hire purchase and finance lease agreements.

Discover why asset finance may be better-suited to your needs than a traditional loan.

Key differences

Asset finance differs from a traditional bank loan in a number of ways. While bank loans can be used for any number of business activities – such as expansion or working capital – asset finance is used to gain access to a specific asset.

As such, an asset finance agreement is typically secured against the asset itself, meaning that the lender has the capability to repossess the asset if the loanee falls behind on the payments. Bank loans, meanwhile, can be secured against another asset or may be unsecured.

What are the benefits of asset finance?

When utilised in the right circumstances, asset finance has a number of benefits, compared to a traditional bank loan. These include a wider range of lending terms offering access to a larger selection of assets, a greater range of flexibility on asset ownership and more.

Improved cash flow

Asset finance agreements break down the cost of the asset into uniform monthly chunks, making it easier to manage your business’ cash flow. Paying for a large asset outright would lead to one outlying month with a larger spend and a restricted cash flow.

Asset finance agreements are typically structured around the lifespan of the asset in question, making it easier to manage and understand how and when your agreement is coming to an end.

Easier application process

In many cases, applying for asset finance is easier than applying for a traditional loan, particularly if you’re looking for a loan from a banking institution and even more so if that loan is unsecured.

These types of lenders have rigid lending criteria and are far less flexible with the terms they can offer. Meanwhile, our varied portfolio of funders means that we can offer a wider range of lending terms with flexible eligibility requirements. Businesses with poor credit scores may still be able to gain access to asset finance where a commercial loan was deemed impossible.

The application process may also be easier – some asset finance providers do not require the same level of documentation as a traditional bank might need. However, as long as these lenders feature on the Financial Conduct Authority’s Financial Services Register, you can trust in their legitimacy. You can rest assured that Anglo Scottish Asset Finance and all of our lenders are fully approved.

Fixed interest rates

In most cases, asset finance agreements also benefit from fixed interest rates. This means you’ll be able to avoid being hit by increased charges due to fluctuating interest rates.

Should the interest rate increase, you cannot protect your business from additional charges when repaying a traditional bank loan. These loans are facilitated by external factors, meaning your repayment plan can change quickly.

An asset finance agreement promises the peace of mind of fixed interest rates and therefore fixed repayment plans.

No collateral requirements

As mentioned, asset finance agreements are secured against the asset itself. This means there is no external collateral, but also that the lender has the legal right to retake the asset in the event that the loanee is unable to meet the agreed monthly payment schedule.

This may be particularly beneficial for startup businesses that do not have the required amount of collateral to take out a loan.

Greater flexibility

Given the vast range of types of asset finance agreement, you can enjoy greater flexibility than with a traditional bank loan. Depending on the type of asset, a different form of asset finance agreement could provide greater benefits for your business.

For example, if your business is interested in financing a fleet of cars, which will be replaced by newer models in two years’ time, owning the cars outright is likely to become a burden in the future.

Some forms of asset finance, such as an operating lease, mean that you can get access to the vehicles without actually owning them, providing more flexibility than taking out a commercial loan to purchase the cars.

You may also see a greater range of flexibility in terms of the amount that can be lent to you – banks are often restricted in terms of the actual amount they can lend, while regulated third-party funders may not be.

A variety of asset types

Asset finance can also be tailored specifically to a range of sectors, from construction and engineering to agricultural, healthcare and more.

Some banks may be hesitant to provide a commercial loan for certain assets or for certain industries. This may be for a number of reasons, such as the risk factor associated with those industries, the volatility of those industries or the nature of the assets themselves.

However, dedicated, sector-specific asset finance agreements give you the option to enjoy tailored finance for the assets you need.

Get in touch

Want to find out more about whether asset finance or commercial finance is right for you?

Our expert team are always on hand to help. Head over to our contact us page to discover more, or give us a call directly on 0191 410 4776.