The popularity of asset-based loans has increased recently, with many small businesses looking to asset finance to provide them with an easy way to access cash for the purchase of equipment, vehicles, supplies, and other essentials for growing the business. Asset finance provides you with credit for essential purchases, but there are other advantages associated with this financial product that makes it particularly attractive.
1. Improves Cashflow
When you arrange an asset finance agreement the main benefit you experience is an improved cashflow. Better financial stability, liquidity, and security translate into a more successful and profitable business. When you have seasonal revenue, or when you are growing quickly, it helps to secure a healthier cashflow that makes it easier to grow and develop the business.
2. Easy to Arrange
In many cases it is easier to arrange an asset finance agreement than it is to apply for a bank loan to purchase equipment. The agreement is suitable for businesses that are profitable, but there are less stringent requirements associated with an application, which makes it an attractive option. You do not need to have such a long track record of trading or profitability in order to be eligible.
3. Flexible Finance Option
When you set up an asset finance agreement you can arrange the amount to suit your needs so that you can purchase the equipment or vehicles you need without stretching your finances too far. If you need a small amount of cash to cover an asset purchase it is often more economical to enter into this type of agreement than to arrange a bank loan. But the option still remains to borrow a larger amount for a more substantial purchase.
4. Conserve Your Working Capital
Purchasing plant machinery, vehicles or equipment puts a drain on your cash resources, which could be better used for the everyday running of your business. As part of an asset finance agreement, the finance company purchases the asset on your behalf, and you use it under a Hire Purchase agreement. During the term of the agreement, the capital that would have been tied up in the purchase of the asset is freely available to the business.
5. Fixed Payments Make Budgeting Easier
Set up fixed monthly payments that make it easier to budget for the asset, and you stay in control of your finances. When you know how much you will be paying each month, and for how long, you can plan your other expenditure around this structure.
6. Optional Refinancing Facilities
In many cases, an asset finance arrangement allows you to release any capital you already have tied up in other assets and existing equipment. Combined with asset finance, asset refinance can make a big difference to your cashflow and make it easier to meet your financial commitments.
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