Raising Finance

Demystifying asset finance – and explaining its benefits

6 min read

05 June 2018

With gloomy forecasts surrounding the potential impact of Brexit on UK businesses, Rory Dunn, sales director at Portman Asset Finance, explains how the flexibility of asset finance is allowing many companies to buck the trend and achieve real growth.

Asset finance is a tool for business owners to secure a variety of key assets that can grow their company. You make fixed regular payments for the use of an asset over an agreed period between 1-10 years. It is now one of the most accessible and flexible sources of funding out there.

So how can you use and benefit from it? Here are answers to some of the most frequently asked questions relating to asset finance, including advice on the best ways to use it.

Why use asset finance?

If you need equipment to expand your business, then asset finance is ideal because you can secure the funding against the asset itself. Use the right product for the right purpose – loans are not linked to assets, for example, and are best used for cashflow or paying for anything unsecured. Payments on lease finance agreements are also tax deductible, giving customers further savings.

Why don’t businesses just pay in one lump sum?

Companies need to retain cash for unforeseen circumstances, or even seasonal dips in revenue. Asset finance saves you from the cost of buying an asset outright and preserves your working capital, freeing you up to invest in other areas of the business. Additional sales staff can generate more profit than the cost of a few per cent on an asset finance deal.

How do you see UK businesses dealing with the effect of Brexit?

We speak to hundreds of SME owners about their plans and we’re not seeing a downturn. In fact, we’re seeing record numbers of businesses looking to invest and build for the future with real confidence.

How important is it for companies to preserve working capital?

I’ve seen first-hand that working capital is the lifeblood of a successful business. Assets should always work and pay for themselves. In my experience, people don’t access asset finance until they really need it. I’d stress the value in thinking about it earlier to cover your back and retain your cash.

What kind of companies benefit from asset finance?

Startups and established SMEs across all sectors find it ideal to access top-of-the-range equipment quickly to grow. Bosses are attracted to asset finance due to the flexible repayments on offer, as well as the low rates, tax benefits and the wide range of assets that can be funded.

What assets can be financed?

You can fund any sort of asset, be it a traditional “hard” asset such as tractors, forklifts, vans and machinery to “soft” assets like office or gym equipment, furniture, air-con systems and IT software packages like CAD, Sage or Microsoft Dynamics.

How easy is it to access – and how long does the process take?

Asset finance is extremely quick and easy to access, although this depends on how well positioned the provider is. Some move from initial contact to full activation of transaction in as little as 24 hours.

What advice would you give owners considering using asset finance for the first time?

In the modern marketplace all sectors are competitive, so you need to be the best in breed. Asset finance allows you to buy the top-specification coffee machine, treadmill or whatever it is you need, rather than settling for what your cash reserves allow. Customers want to receive a quality experience or service, so the best equipment sets you apart from your competitors.

What common misconceptions are there?

It amazes me that people still believe finance is for those who can’t afford to buy. The reality is quite the reverse – asset finance is designed for ambitious, profitable companies who are looking to grow and reduce tax liabilities. Some also think that going through a broker to arrange asset finance is going to be more expensive than approaching a lender directly. 

In the case of Portman, can we help firms fund a variety of assets?

We tailor a bespoke package of finance products for the customer. If they are starting a gym business, for instance, we look at the equipment, the fit-out, the member management system etc and will break all that down and find the best lender for each component. There may be five different lenders making up one overall package for a customer.

What about businesses that experience quieter periods of the year? 

The beauty of asset finance is the flexibility that allows each agreement to be tailored to the specific requirements of each business. There are companies that are affected by seasonal trade – like seaside-based businesses within the amusement and gaming sector – where we would arrange lower payments during the quieter months.