What is asset finance and how does it work?

Close Brothers Asset Finance has been providing funding for the UK’s SMEs for several decades, yet many business owners have a limited understanding of what asset finance is and how it can help them. In this short piece, they outline what it is and how it works.

What is asset finance?

Asset Finance is an alternative form of funding used by businesses to obtain the equipment, vehicles, or capital they need to grow.

Common examples of asset finance products are:

  • Hire Purchase (HP): Allows the customer to buy the equipment on credit. The finance company purchases the asset on behalf of the customer and owns the asset until the final instalment is paid
  • Refinancing (Capital Release): The finance company purchases the asset from your business and finances it back to you, releasing the equity raised into your cash flow. Repayments are calculated in line with the income stream that will be generated by the asset; at the end of the refinance term, you own the asset
  • Finance Lease: The full value of the equipment is repaid to the finance company, plus interest, over the lease period. At the end of the term, the company can choose to:
  • Continue to use the asset by entering a secondary rental period
  • Sell the asset and keep a portion of the income from the sale
  • Return it
  • Operating Lease: Similar to a Finance Lease, an Operating Lease allows you to rent the asset from us while you need it. The key difference between the two is that an Operating Lease is only for part of the asset’s useful life. This means you pay a reduced rental because the cost is based on the difference between the asset’s original purchase price and its residual value at the end of the agreement.

Sectors we operate in

The beauty of asset finance is its flexibility – it can be used to fund any asset.

It makes the otherwise unaffordable affordable because it gives businesses access to the vehicles and equipment they need without incurring the cash flow disadvantage of an outright purchase.

Agreements can also be customised to the business’s needs, with flexibility on both the term and repayment schedule.

Some of the sectors we work with:

  • Materials Handling
  • Agriculture
  • Packaging
  • Aviation
  • Plastics
  • Bus and Coach
  • Heavy Goods Vehicles (HGVs)
  • Print
  • Construction
  • Renewable Energy
  • Engineering
  • Taxis
  • Executive Vehicles
  • Transport and Logistics
  • Fairground
  • Vehicle Rentals
  • Manufacturing
  • Waste and Recycling
  • Marine
  • Woodworking

Why Close Brothers Asset Finance?

We are the largest, fast-growing, most successful and longest-established asset finance funder in the UK with over 30 years’ experience working with SMEs through all economic cycles.

Our team of finance specialists – many of who have industry background themselves – work with businesses across the UK to provide funding for both new and used vehicles and equipment. As sector experts, they understand how vital it is that you have the right tools at your disposal, so whether you are looking to expand or replace your assets, we can help.

For more information, please visit: https://www.closeassetfinance.co.uk/asset-finance