Asset finance is a type of business loan that you can take to finance your business in the long run. This loan is secured on the assets that you are financing at a particular period. With this loan, you can extend the cost of the asset over an expected period.
In this article, we will discuss the five things that you need to know about asset finance.
Advantages Of Asset Finance
Let’s have a look at the advantages below:
1. The interest rate and monthly payment in asset finance are fixed. This makes it easier for the person to make a budget that is accurate to manage the cash flow better.
2. You can acquire the equipment that you cannot purchase immediately with the help of asset finance.
3. If you compare asset finance with a bank loan, you will find out that a regular bank loan is riskier than Asset Finance.
4. Many business options are available, and you can structure the asset finance according to your requirements and business.
5. Many providers are providing asset finance in the market, and that is why it is easy to find the one that works the best for you.
Five Types Of Asset Finance
1. Commercial Hire Purchase
In this type of asset finance, the lender can buy the asset from the vendor, and then they can further sell it to you over a specific time. In this type of asset finance, you will have to make consistent payments. The asset ownership is then transferred to you after you have made the last payment. You can sell it at this stage, or if you decide to keep it for your business, you can do that as well.
2. Operating Lease
If you are looking forward to upgrading vehicles and information technology assets in your organization, a smart choice will be to take an operating lease. It would help if you went with this option when you already know that you will not need the equipment for all of its lifespan.
3. Finance Lease
Operating Lease and Finance lease is a little bit similar, but they have one difference between them. If you go with the option of a finance lease, then you will have to buy the asset at the end, and then it will be yours.
4. Novated Lease
This release is a good way to assist you in attracting a lot of people to your team. Once an agreement has been signed, you will deduct the lease payments from your employees’ salaries. You need to keep in mind when you go with this type of lease, and that is the lender can dictate where you can buy the acid from. This is a warning because it can limit your options, and you might not get the best price possible!
5. Chattel Mortgage
It is a type of simple business loan. This loan is on the secured asset that you are purchasing. The term of this loan depends upon the lifespan of the asset.