This week has seen a number of asset finance enquiries and funding the purchase of a new asset or re-financing an existing business asset can give a real competitive edge to a business.
Asset finance is a form of finance enabling a business to purchase or refinance any specific business asset. When buying a brand new asset it may not be commercially prudent for a business to use any cash reserves it may have built up so asset finance enables the purchase to go ahead with repayments agreed over a term.
Refinancing enables a working asset (which may even be subject to existing finance) to be utilised to generate additional cash.
When considering any type of asset finance there’s a general rule suggesting the term of any facility should broadly equate to the expected useful life of the asset. In other words short term finance shouldnt be used for a long term project, such as a property purchase.
(One of the contributory factors to the crash among certain banks and building societies was mis-aligning their funding – borrowing short and lending long)
This rule extends to invoice finance as well. Invoice finance is a working capital facility with funding made available against outstanding invoices. Using funds generated from outstanding invoices to buy long term assets (cars/property etc) would not be commercially sensible.
All sorts of asset finance exist with varying rates and security requirements. With many asset finance facilities there are associated tax ramifications. Facilities can be arranged very quickly if needed.
As mentioned many times, independent advice, such as that available from Factoring Partners is vital. We can point businesses in the right direction, not just in the type of commercial finance but the providers too. we continually track lenders not just by way of rates charged but in monitoring their reputation.
We will talk to any business, without obligation, so feel free to get in touch.