PVS Talks... Asset finance or outright purchase? Which is right for your business?

When it comes to acquiring new assets, one of the key questions that many businesses face is: should we purchase using our cash reserves or via an asset finance facility (e.g. finance lease, hire purchase agreement or contract hire arrangement)?

Purchasing assets outright typically requires a high outlay of capital initially. This may mean using cash reserves that could be better spent elsewhere in your business or sourcing a loan to cover the costs. If this was a bank loan, for example, the funder will typically insist on raising a charge over all the other assets in the business as security, which too many is deemed unnecessary. Some businesses may opt to use their overdraft to fund new assets but as this is a short-term facility that can be withdrawn at short notice, this method may not always be appropriate.

An alternative solution could be the use of asset finance. This is now one of the most accessible and flexible sources of funding on offer and can be used by businesses to acquire new/used assets including; Plant & Machinery, Vehicles, Trailers, Construction Equipment & Technology.

A key benefit of using asset finance is that it frees up working capital, which is the lifeblood of any business. Retaining cash reserves, rather than spending a large amount to fund the full cost of the asset, will enable a business to cover any unforeseen circumstances or invest in other areas that can help generate more profit. It will also allow a business to fund top of the range assets, as opposed to whatever they can afford, which can give a customer a real competitive advantage in the marketplace.

The security taken by the lender is against the asset itself rather than charged over the whole business, which is seen as more appropriate.

Business owners are also attracted by the flexible repayments that are on offer with asset finance, which can be monthly, quarterly or annually. Seasonal repayments can also be agreed, which means a business can make lower repayments during quieter months to fit with their cashflow requirements.

Another point to note is that payments on a finance lease agreement are tax deductible, giving customers further savings. For some assets it is also possible to include a balloon payment at the end of the agreement, which can be a real cash flow bonus as it reduces the monthly repayment amount due.

Asset finance is quick & easy to access and is available to most type of businesses. Talk to us today on 01278 550270 to find out more.

PAUL TREGALE
PVS LTD - SALES DIRECTOR