While there are many different types of asset finance available, there are two variations that are proving to be very popular amongst growing SMEs: leasing, and hire purchasing.
Leasing asset finance is when the chosen lender retains ownership of the equipment. The equipment is simply leased from the lender for as long as required.
purchasing asset finance is when the lender retains ownership of equipment until the business has made enough repayments to cover the full costs.
Whichever type of asset finance a business chooses, lenders will typically offer rates for ‘hard’ assets, such as manufacturing equipment, and ‘soft’ assets, such as IT software. Funding is provided in exchange for a security interest in a business’’ most valuable assets.
There’s two primary benefits for small businesses taking out asset finance – typically approval rates are higher than for traditional banks loans for SMEs, and asset finance is, on the whole, less risky for the borrower. Approval rates are higher because lenders retain ownership of the assets until repayments have been made in full – if a business fails to make repayments, lenders don’t lose out financially. And it’s less risky for borrowers simply because if repayments aren’t made, a company loses nothing but the asset collateral – not their premises, or their business.
SMEs may also find that rates for asset finance are more attractive than for traditional lending. Compare asset finance rates online at compareyourbusinesscosts.com to see if your business could find an affordable deal that could directly facilitate growth and development for your company.