According to the latest figures release by the FLA new asset finance business grew 9% in October 2018 compared the previous year. Many businesses will be benefiting from the boost this will contribute towards business development and growth but if you are considering joining the growing number of businesses who benefit from asset finance it is important to ensure you select the right asset finance for your business.
Most business owners opt for asset finance when much like taking on any other type of business loan they require funding. For example, they may wish to lease an asset if they want to spread the cost over its lifetime. This avoids the pitfalls of rapid depreciation of assets.
Asset finance however comes in many forms including finance lease, hire purchase and it is important to compare these against other products such as commercial loans. While the benefits of asset finance are often clear it is worth consulting a qualified expert to discuss what is best for the business both in the short and long term.
You will find a wealth of information on the different options available on our website or you can give us a call and speak to one of our advisors to find out how asset finance can work for your business.
According to the most recent figures released by Finance & Leasing Association (FLA) new business in the asset finance sector increased by 9% year on year in the month of October. This indicates that Brexit uncertainty hasn’t put off firms looking to use asset finance to grow and develop their businesses.
With asset finance covering several sectors, some areas have shown even more spectacular growth than the overall figure suggests. Machinery finance for example showed growth of 16% compared to October 2017 while business equipment finance was up 29% which is nearly one third up. The commercial vehicle sector also saw an increase of 23%.
These figures represent a strong end to the 2018 which began with similarly positive increases in new business in the construction and agricultural asset finance sectors. The asset finance sector is on course for another record-breaking year which will come as welcome news as bank lending to business continues to show a decline in loan approvals across much of the UK.
Despite the good overall news, technology equipment finance saw a fall in new business which pushed the overall figure down. It will be interesting to see if growth in new asset finance business is maintained in 2019.
As we start the new year many of us will have plans to expand our business or perhaps look at new products and services. This may not be possible, however, without the extra costs involved in purchasing new equipment, new software and so on.
This extra cost burden can be off putting but if you take advantage of the Annual Investment Allowance (AIA) did you know that you can offset your investment in equipment and technology against tax?
Better still you can offset 100% of the investment against your taxable business income so not only do you get to improve your business operation and innovate, you can also reduce your tax burden at the same time. The allowance was also recently increased from £200k to £1million.
If you are planning to take advantage of the AIA this year you can use asset finance to spread the cost rather than invest all the cash in your business up front. This multiplies the benefit to your business.
The AIA was originally introduced in 2008 and the recent increase from £200k to £1million is designed to help stimulate investment in business at a time when it will be needed more than ever in the UK.
The asset finance market continues to grow as business owners wake up to the benefits this form of lending. So why should your business consider asset-based finance and what benefits can it offer over traditional forms of lending?
One of the major benefits of asset finance is that it not only provides finance for a business, it also helps fund the equipment needed to expand or improve productivity.
One of the major hurdles for owners of startups and small businesses is having enough finance to scale up their operations. Equipment is generally expensive and if this equipment is purchased it often takes vital funds away from other areas of the business.
Spreading the cost of this equipment using asset finance is business friendly because it allows assets to be used to generate income freeing up cash to be used in other areas of business development.
Asset finance is provided by specialist asset finance companies and the process is often fast and straightforward. While banks will be demanding in the amount of information, they need due to the risks involved with traditional lending, the risks with asset finance are lower reducing the time it takes to put the funds in place.
To summarise, asset finance companies offer an attractive alternative to traditional lending by using assets to free up and maintain cashflow allowing business owners to expand and improve their operations.
Starting a business from scratch is tough and the odds can be stacked against you if you don’t have enough investment capital to plough into the business at an early stage. Taking a loan, however, is also a major step which is why we have put together this guide to see if your startup is ready for a loan.
Do you have a business plan ready?
Having a business plan written down is a crucial step towards getting business finance. Lenders are going to want to see that you are serious about your business and a business plan indicates to them that you have took the time to develop your business and you have a clear pathway towards growing it.
Can you prove there is demand for your product or service?
Having a business idea and putting it into a plan is one thing but testing it out in the real market place is quite another. It will strengthen your case significantly if you can provide some data on real sales made and that your business idea works.
Finally, do you know what you need a loan for?
Applying for a business loan without any idea what it is for will almost certainly end in a failed application. Finance providers will be looking for some assurance over what the money will be used for.
The construction industry is a varied and complex business particularly on large development projects where there will be a number of parties involved. From developers to builders and investors each will have a role to play before a project reaches completion and everyone can benefit from the return on investment. With this in mind here are some of the key considerations when seeking construction finance and how specialist finance for the sector can help.
Construction finance can save time
Getting a development project off the ground often requires investors to finance 75% of the development cost. This can delay projects while investors are sought to meet this cost. Construction finance brokers can help secure the best rates and find suitable lenders.
Construction finance can help meet upfront payments
Construction companies will normally demand upfront payments before starting work on a project. This means developers will need the funds to pay them. These funds will come from investors but often to make investments more attractive, payments are staged. Construction finance can help with construction costs and plug any gaps in funding.
Construction companies can overcome cashflow challenges
The main challenges for construction companies are paying for raw materials and their workers. If a project is late being delivered and payment terms include a lump sum payment on completion this can mean delays to the final payment putting the business at risk. Construction finance can help reduce this risk and cover upfront costs.
All businesses need equipment and some will require more expensive equipment than others so how should you fund the purchase of that equipment?
The answer is an equipment loan. If you are wondering how you can turn equipment you haven’t purchased yet into a loan let’s fill you in on the details.
An equipment loan is normally based in the lifespan of the equipment you purchase so it is ideal for those major pieces of equipment you expect to be using for a long time.
The advantages of an equipment loan include the following:
- The equipment is used as collateral for the loan so the risk is less than it would be for other types of loan. What is more you will be the owner of the equipment you are financing so you will build a certain amount of equity over time.
- Rates are competitive and certain business types may find this type of loan preferable and less expensive than term loans or other far riskier forms of finance such as credit cards.
- You may need to make a down payment on the equipment you are financing which could mean a higher upfront cost than alternative forms of finance.
- You need to be sure the equipment won’t become obsolete before the term is up.
Your idea of business finance may be a trip to the bank to get a business loan and this is the route most SME business owners will go down. However, there are plenty of alternative sources of finance to explore including some of the following you may not be aware of.
Asset finance is ideal for businesses that require expensive equipment but lack the funds to go and pay for all the equipment needed upfront. Asset finance can come in many forms from vehicle finance to finance on machinery. Asset finance is also flexible and can be arranged in the form of a lease or higher purchase (hp).
Did you know you can use your unpaid invoices to gain finance? You can use those invoices as collateral for loans or you can sell them to an invoice factoring company. This means you can get your hands-on cash in advance without having to wait for invoices to be paid. This is a great source of funding if you need cash in a hurry but with invoice financing you will still need to collect the invoice payments yourself.
Merchant cash advances
Another way to get your hands on some cash fast is to use a merchant cash advance. With this form of business finance, you receive a lump sum of cash up front and you won’t need to make a fixed payment each month. Finance can be paid back daily weekly or it can be paid out as a percentage of your sales from credit and debt cards. The downside is this type of finance can be more expensive than other options.
Business owners can often be afraid to look at alternative routes for their finance needs but there is a lot to be gained from using a commercial finance broker to get the best finance deals.
Here are 3 reasons why your business should consider using a finance broker
You can get access to better rates
You shop around for everything else so why not shop around for the best rates on finance? A commercial broker can often obtain special rates from lenders because they will generally have good long term relationships with them. They can also help with paperwork to ensure you give yourself the best chance of securing the finance you need.
They are experts
Commercial finance brokers that have the relevant qualifications and accreditations are experts in their field. Using experts in anything will save you time and sourcing the best finance products is no different.
Save Yourself Time
We are all growing accustomed to just going online and searching for deals for anything from shopping to houses but finance is different. The various products available could never fit on one price comparison website so it could take a huge amount of time for you to try to beat the rate your commercial finance broker can provide.