14 November 2024, 00:20
Media66
By Furniture & Joinery Production Aug 22, 2018

Demystifying asset finance for the Furniture and Joinery sector

With its reliance on machinery for production, the Furniture and Joinery sector is perfectly positioned to take advantage of Asset Finance to fund the tools they need. If you haven’t heard of it before or don’t know how it works, here’s all you need to know:  

What is asset finance? 

Asset finance is an alternative form of funding used by businesses to obtain the equipment they need to grow. In effect, it utilises the residual value in an asset to either pay for or put down a deposit on another piece of kit. 

It usually involves paying a regular charge for use of the asset over an agreed period of time, avoiding the full cost of buying outright. 

Common examples of asset finance products are: 

• Refinancing: The finance company purchases the asset and finances it back to you. 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

• 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, at which point the customer is given the option to buy it

• 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; to sell the asset and keep a portion of the income from the sale; or return it.

• Operating lease: An operating lease may be more appropriate if a company does not need the equipment for its entire working life. The leasing company may retain responsibility for maintenance and is likely to take the equipment back at the end of the lease period

Types of assets financed

The beauty of asset finance is its flexibility – it can be used to fund any asset, from spindle moulders and jointing machine sets to band saws and routers. 

It makes the otherwise unaffordable affordable because it gives businesses access to the 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.

www.closeassetfinance.co.uk/asset-finance

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