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Asset-based lending

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Asset-based lending is becoming a fast-growing funding option for many businesses in the UK. Asset finance companies allow businesses to acquire secured loans using their assets as collateral. Making it easier for businesses to buy big items, such as company vehicles, and plant and machinery. Asset-based lending also allows businesses to spread the costs of high-value items and use the assets, as they pay for them. There are a few different types of asset-based lending that asset finance companies offer, all provide a slightly different service and have differing benefits. It is important to understand these differences so you can choose the best service for your business needs.

Alternatively, you can use a specialised business funding company like Wergs Consultancy, who have a dedicated team that understands asset finance and the different options available.

Business loans for equipment

When applying for a loan you will most likely need to have some security, something to use as collateral. Unfortunately, not every business has a business property to use as security, which is where asset-based finance is perfect. In asset-based finance a company is able to use plant, machinery and any other assets they own as security for business loans for equipment. Capital equipment loans such as this are much easier for businesses to acquire and they even allow businesses to purchase equipment and then use that equipment as they pay for it. Financing options for assets such as this allows businesses the opportunity to work to their full potential, with all the equipment they need.

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Equipment Financing

Asset-based lending also gives businesses the chance to spread the cost of any assets they need to acquire, which is especially useful for high-price equipment that a business may not be able to pay for in full immediately. With equipment financing, a business can purchase an asset and then spread the cost over a pre-determined period of time. Traditionally, if a company needed an asset but was unable to buy it outright, they would need to secure a loan first, then use the funds to purchase the asset and pay the loan back. This often was problematic for businesses, especially small businesses with no assets to use as security for a loan.

With this type of asset-based securities agreement, you can apply for a loan to purchase the asset and actually use that same asset as security for the loan.

Types of asset management

There are lots of different types of asset management, which one you need will depend on the asset you need, your business situation and your future needs. Here are some of the primary types of asset management:

Hire purchase

Hire purchase allows a business to buy a new asset and spread the cost of the asset in instalments. The asset management provider will continue to own the asset until you have paid the entire balance, when that happens ownership of the asset can be transferred to your business. This means you won’t be able to sell the asset until you’ve actually paid for it.

Lease financing

Sometimes called a capital lease, this is where an asset management company buys an asset on your behalf and then rents the asset to you. You would then make monthly payments for the commercial leasing of the asset, until you have covered the cost of it (plus interest). Once you’ve paid the balance you have the option of extending the rental period, returning the equipment, or selling it to a third party on behalf of the asset management company.

Equipment leasing and financing

Similar to lease financing but with this option you have the chance to own the asset at the end of the payment term. During the rental period, the leasing company is responsible for maintenance of the asset and at the end of the term agreement you have the option to extend the lease, return the item, upgrade the asset, or buy it outright. This is a popular choice for funding for assets, because you have a variety of options at the end of the term.

Agriculture finance

This finance option is specifically designed for businesses in the agriculture industry, such as farmers. Agriculture finance allows farmers and other similar tradespeople to acquire the often-expensive plant and machinery they need to complete their job, without them having to pay the full value for the asset outright.

Wergs Consultancy Asset Leasing vs Buying

At Wrags Consultancy, we appreciate that the area of asset-based finance, with its many options, can be a little overwhelming. As a business owner you might not be sure of the benefits of leasing vs buying, and you may not be sure which (if any) of these asset-based lending options you qualify for. This is where the team at Wrags Consultancy can be invaluable. We will understand your business and its current situation, as well as your asset needs and requirements. Using this information, we can recommend the best asset-based finance for your business and help you to understand the differences between the different asset-finance options, so you can make the best choice for your business.

For more information, or to start your asset purchase today, contact our friendly team of specialists.

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