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What is Asset Finance & How does it work?

Asset finance is often  a great tool to buy things for a business that are very expensive, like new equipment or other things that cost a lot of money. When a business needs to grow but doesn’t have the money right away, or if they want to spread the cost out over a longer period, they use this type of financing. In easy words, asset finance lends money to people to own things, like cars or equipment.

When a business wants to get a loan from a company that lends money, it approaches “asset finance provider,” they can use things like industrial plants, machinery, and vehicles as collateral.

To buy new equipment, vehicles, or machinery for a business, the finance company will pay for it. The client will pay a set amount each month to the provider.

The item may become the property of the business in the long run, depending on the type of asset finance that was used to buy it.

Who can take Advantage of Asset Finance?

Asset financing has a wide range of businesses and organisations usage, including sole traders and small to medium-size businesses, as well as big businesses and corporations. When this was first come up for adoption, it was mostly a choice for bigger businesses. Now that the minimum amount of money that one can borrow is lower, this has become a more common option for all kinds of businesses that want to get asset-base financing from banks.

As a side note,one should know some providers specialise in certain types of businesses. These businesses might be small businesses, public limited companies (PLCs), or something else.

When you use asset finance, how much money can you get?

While the limits will vary from provider to provider, it shouldn’t be too hard to get asset financing for amounts as small as £1,000 up to around £10 million. In any case, the lender will need to be sure that the business can pay back the loan or buy something before it can get it.

During how many years can you take out a loan for assets?

In most cases, the length of an asset finance agreement is by how long the asset will be in use. For example, if you want to buy a piece of equipment, the length of the agreement is set by how long the asset is in use. As a general rule, this will be between one and seven years. However, changes by a finance company are possible.

What kind of things can one finance?

As a general rule, asset finance providers will look at a wide range of high-value items, both for purchase and for leasing or borrowing money against. These assets, on the other hand, must meet the DIMS rules. These are the assets that are we are talking about, which are:

  • Durable
  • Identifiable
  • Moveable
  • Saleable

Get in touch with our finance experts at Alpha Funding to know more about Asset Finance.

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