An Overview Of Asset Finance And Its Various Types

An Overview of​ Asset Finance and its Various Types
Asset finance allows companies to​ collect funds for the purchase of​ assets they might need to​ make their businesses run successfully .​
At times, paying a​ huge amount of​ cash at​ one time for buying assets can be really hard to​ manage .​
Moreover it​ would significantly affect the company's working capital .​
With asset finance one can raise the capital to​ buy assets and the money can be returned to​ the finance company through regular payments over an​ agreed period of​ time.
Asset finance can be used for purchasing new and used cars, coaches, light and heavy commercial vehicles, plant machinery and office equipment .​
With the help of​ asset finance solutions, you can buy equipment for your business without spending a​ large sum in​ one go .​
In other words, it​ saves you from the trouble of​ arranging a​ large amount of​ capital for buying much needed assets .​
Major Types of​ Asset Finance Available in​ the UK
Hire Purchase
This typical credit facility is​ readily available where the financier allows the hirer the right to​ possess and use an​ asset in​ return for regular payments .​
Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier .​
After the hirer pays a​ deposit of​ 10-20% to​ the finance company, he can take the asset directly from the supplier .​
After a​ balloon payment is​ made at​ the end of​ the term, the title of​ the goods is​ transferred to​ the hirer .​
Lease Purchase
Lease Purchase is​ often confused as​ a​ regular lease .​
It is​ similar to​ a​ hire purchase agreement with the only difference being that in​ a​ Lease Purchase the hirer needs to​ pay a​ deposit of​ 10-15% as​ a​ multiple of​ the repayments .​
The payment for the remaining balance and interest is​ done in​ instalments .​
Moreover, a​ Lease Purchase agreement is​ based on either a​ fixed or​ variable rate .​
The monthly instalment can be reduced by the inclusion of​ a​ balloon.
Contract Hire
In Contract Hire, a​ rental agreement is​ made between the supplier and the customer .​
Here the customer hires the asset for a​ fixed period of​ time and after the completion of​ the period, he returns the asset to​ the supplying dealer .​
With contract hire, the customer gets the chance to​ use the new asset without the risks associated with ownership .​
Finance Lease
With finance lease, one can get up to​ 100% finance for the acquisition of​ plant equipment required in​ a​ business .​
Here, the ownership of​ the goods remains with the finance company which rents the goods to​ the hirer over a​ predetermined period .​
Initially, the hirer needs to​ pay the documentation fee and an​ initial payment of​ a​ multiple of​ rentals .​
The remaining cost of​ the asset is​ paid back over the agreed time period .​
Operating Lease
Here an​ agreement is​ made to​ rent the asset for business purposes for a​ predetermined period .​
At the expiry of​ the agreed lease, the asset is​ either returned to​ the financier or​ an​ offer to​ purchase it​ for a​ mutually agreed price is​ made .​
One major line of​ difference between an​ operating lease and a​ finance lease is​ that the primary rental period for an​ operating lease does not cover all the capital costs and the hire charges.
Looking at​ these various types of​ asset finance, it​ would not be tough to​ choose one for buying expensive equipment without forking out a​ huge sum of​ money at​ one go .​
But it​ is​ essential to​ understand asset finance and its various types properly before applying for it .​
There are many finance companies that can help one to​ get competitive and tailored asset financial solutions to​ suit one’s personal and business requirements .​
It is​ advisable to​ take professional help to​ avoid any sort of​ complications in​ the future .​
One can take help from any reputed asset finance based consulting company to​ get a​ better deal for one’s business.

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