I’ve been working in asset finance for so long now that I take it for granted that everyone knows what it is; yet, in our quarterly survey of 1000 UK SMEs – which we call our business barometer – the percentage of yes responses to the question: Have you heard of asset finance?, has remained stubbornly at around 40% – since 2013.
Ian Barker, managing director, manufacturing, Close Brothers Asset Finance
What is asset finance?
Asset finance is an alternative form of funding used by businesses to obtain the equipment 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, at which point the customer is given the option to buy it
- Refinancing (Capital Release): 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
- 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.
Types of assets financed
The beauty of asset finance is its flexibility – it can be used to fund any asset, including:
- CNC routers
- Milling machines
- Drill press
There is very little that we won’t consider financing.
We can even help with the refurbishment of assets, for example, where we pay the refit costs by taking security of an asset to aid cashflow, via Sale & HP Back.
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.
Why Close Brothers Asset Finance?
We are the largest, most successful and longest-established specialist asset finance funder in the UK with over 30 years’ experience working with SMEs through all economic cycles – the fact is, there’s very little we haven’t seen or experienced.
Our team of finance specialists – many of who have relevant sector experience themselves – work with businesses across the UK to provide funding for both new and used equipment. As sector experts, they understand how vital it is that you have the right equipment, so whether you are looking to expand your range of equipment or replace it, we can help.
With over 20 years’ experience between them, craftsmen and designers Malcolm Weir and Tom Jarvis established West & Reid, a furniture and cabinetmaking business. Based in London, the company manufactures bespoke kitchens and residential interiors.
To grow the business, the owners wanted to invest in a new SCM Morbidelli N100 CNC router.
After being put in contact with Close Brothers Asset Finance, the team put in place an unwritten hire purchase agreement within 48 hours, along with a VAT deferral after the arrival of the machine did not match up with the end of West & Reid’s VAT quarter.
Not only was the business able to invest in the latest technology to produce outstanding quality kitchens and enhance its offering, but the additional support of a VAT-deferral protected West & Reid’s cash flow while waiting for the VAT to be reclaimed.