Asset finance made easy

Victory are an independent company specialising in providing all types of finance for the acquisition of plant and equipment in the construction/plant hire industry.

Asset Finance.

Sometimes referred to as on 'tick', the 'drip-feed' or the 'never-never', most companies are unaware of the benefits of asset finance.

John Bradbury from Victory Leasing and Finance weighs up the advantages.

The ever expanding overdraft.

When it comes to money or cash-flow many small businesses look to their overdrafts to provide the answer.

But while asking your bank manager for an overdraft extension keeps the creditors at bay, it may not be a prudent way to look after your business in the long term.

Overdrafts are designed to provide businesses with working capital rather than make capital investment as they may be reduced or withdrawn at short notice and are vulnerable to interest rate changes.

Asset finance on the other hand can give your business a competitive edge.

A business can obtain the plant and equipment needed by the company without tying up credit from the bank or eating into valuable cash reserves.

It also assists cash-flow with a regular payment scheme.

What is asset finance?.

A term used to describe leasing and hire purchase, it allows businesses to use an asset for a fixed period of time in return for regular payments.

Asset finance takes into account the value of the asset as security instead of relying on the strength of the balance sheet and can be helpful for small businesses, businesses in asset intensive sectors or where the rate of growth is putting pressure on cash flow.

Options.

Leasing falls into two main categories.

Finance leasing which offers immediate use of the equipment for a small capital outlay, and operating leasing which allows a business to use equipment while it needs it.

If for example a business wins a contract for a defined period of time and needs expensive equipment to fulfil the contract, an operating lease would confine the leasing rentals to the period of the contract.

Additionally, the monthly leasing repayment would be lower than alternative funding solutions and usually 100% of the cost can be financed.

Hire purchase is a straightforward agreement that allows a business to acquire its equipment and pay for it over time with an option to buy the equipment once the final instalment is made.

The customer will generally offset interest charges against taxable profits and claim any writing down allowances.

An important benefit for the smaller business as first year allowances may also be available.

When to use it.

Leasing can be used for assets that hold their value such as large pieces of plant and equipment, vehicles and also for other assets such as computers, phone systems etc to ensure a business has the equipment it needs without heavy expenditure.

Repayments are fixed so new assets can be financed and available capital retained.

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