Starting a business can be daunting at the best of times. Factor in the rising cost of equipment, the inaccessibility of loans, predatory payment terms and painfully long decision times, and it is no wonder that many people are not happy to take the risk.
SME asset finance is a key method for small businesses to acquire the assets required to either get their business off of the ground, or to help accelerate growth.
But what exactly is asset finance, and why is it good for SMEs?
What is asset finance?
Business asset finance is a way for organisations to access equipment or machinery (assets) that may otherwise be unaffordable.
Instead of buying costly assets up front, SMEs can instead choose to pay for them over an agreed timeframe, gaining instant access to the asset(s) that, quite often, are required for growth.
Between “finance lease”, “hire purchase”, “contract hire” and much more, it is easy to get lost in the asset finance nomenclature. You can learn more about all the different varieties of asset finance by clicking here.
Is asset finance good for SMEs?
Asset finance solutions are a fantastic choice for SMEs because they are significantly more flexible than other traditional lending options.
You can either use your financial reputation (business plans, forecasts, credit history, etc.), or can use your business’ existing assets as security, meaning that even businesses right at the start of their journey can successfully acquire the assets they need.
Because of asset finance’s inherent flexibility and often fixed interest rates for the duration of the term, it is often used as an alternative to overdrafts, bank loans and credit cards.
6 Benefits of asset finance and leasing for SMEs
1. Access assets immediately
Asset finance allows you to immediately access the equipment you need in the most time-efficient manner.
2. Choose your ownership
The wide variety of asset finance options available allow you to determine whether you own the asset when the agreement finishes, or whether you return it at the end of the finance agreement.
3. Help control costs
Repayments are fully priced and structured at the outset, meaning that you know exactly what you need to pay every month.
This allows SMEs to carefully budget and secure their cash flow, safe in the knowledge that their repayments are set.
4. Improve cash flow
By paying for an asset over an extended period, many SMEs find that their amount of working capital increases (there is often no lump sum required for a big purchase).
5. Save on tax
SME asset finance solutions can be 100% tax deductible against profits.
For further details on this, please seek financial advice from your accountant.
6. Encourage growth
The culmination of all these benefits is faster growth. Greater security, improved cash flow, mitigated risks and access to required assets all work synchronously to encourage SME growth in the majority of cases.
What can be financed?
There are essentially no limits on what can be financed. If a business needs an asset, it’s possible to finance.
This includes both “hard” assets such as plant machinery, and “soft” assets like IT software. Some examples of commonly financed assets are as follows:
- Machinery
- Vehicles
- Catering equipment
- Gym equipment
- IT hardware & software
- Printers and scanners
- Security equipment
- HVAC and other air conditioners
- Farm finance (machinery, equipment, livestock, etc.)
- Renewable energy solutions
This is a small sample of what’s regularly financed. Should you need advice on your business’ financing needs, don’t hesitate to get in touch with business asset finance experts. To speak to a specialist, contact us on 01827 300 339.
How to apply for asset finance
Once you have decided to pursue asset finance, it is time to begin the application process.
This can feel intimidating, but there is no reason that it should – the process is relatively simple.
Research in advance
Before you begin, it is important to determine exactly what assets you require. This will streamline the process, and give you an idea of exactly how much you need to borrow.
Gather documentation
This can vary substantially from lender to lender, or on how much you are looking to borrow.
Generally, a lender will ask to see identification (driver’s licence, passport), cash flow projections and other business plans, bank statements, balance sheets and more.
Again, having this all gathered in advance will help to streamline your application.
Choose asset finance method
As mentioned, there are a wide variety of asset finance types; it is important to choose the one that is right for your business.
If you are unsure about what finance type is best for you, talk to our team. We can help explain the most suitable options so you can choose the best available asset finance solution or business equipment leasing option for your business requirements.
Identify the best lender for you
Different lenders will offer variable rates, fees and criteria. An attractive interest rate does not necessarily mean a better deal, as these deals will often include fees and charges that result in a more expensive long-term expenditure.
Many banks are far more selective than non-bank lenders, with stricter requirements and drawn-out processes. Alternative lenders can often prove quicker and more efficient than relying on a bank for asset finance.
Apply for finance
Once you are ready, and have everything prepared, it is time to apply for your chosen finance option.
Asset Finance for SMEs with Shire Leasing
At Shire Leasing, we believe that every SME deserves the opportunity for success. That is why we have developed the most efficient and affordable SME asset finance solutions possible, and is why we are trusted by over 60,000 British SMEs.
Whether you know what finance solution you require, or need a helping hand, get in touch with us today, or call us on 01827 300 339. Our experts are here to advise and guide you to the best asset finance solution for your SME.
