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Should You Consider Asset Finance For Your Startup Business?

Starting a business is never an easy venture. You need a great idea, innovative marketing, and a great team to support you.

Should You Consider Asset Finance For Your Startup Business?

Besides, you need a lot of money for equipment, vehicles, materials for production, etc. That is the trickiest part for many. Luckily, asset finance is an excellent way for you to get started. 

Follow along as we dive into business asset finance, its types, and all the ways in which it can help your company. 

What Is Asset Finance?

Asset finance is a financing option small businesses often use to obtain expensive equipment or anything else they might need.

Put simply, you get the equipment or resources you need, and an asset finance company pays for them, giving you a loan. Then, you pay off that loan in monthly payments with interest over a certain period of time. 

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Depending on the type of loan, anything you get through asset financing can become yours after you’ve paid off the debt.

This type of financing is excellent for a business startup that has the opportunity to grow and but lacks the funds to do it. 

Types of Business Asset Finance

Hire Purchase

Hire purchase is the primary type of asset finance and the one we briefly mentioned above. Here, a company purchases assets in your name, and you pay them off in installments.

The lender owns the asset until you pay everything off. Then, you get the chance to purchase the asset at a nominal rate.

Equipment Lease

This financing option comes with a lot of flexibility and freedom for you. You sign a contract with a lender and agree to use their equipment for a certain period while paying a monthly fee.

Once the period is over, you can return the equipment, extend the lease, upgrade to newer equipment, or buy the equipment outright. 

Operating Lease

If you are looking to borrow equipment for a short period at an affordable rate, an operating lease is a way to go. You only pay for the asset while using it and not for its full value as you do with an equipment lease. 

Finance Lease

This type of lease enables you to just borrow an asset and use it for a time. After that time passes, you do not have the option of purchasing the asset and can only return it. 

Asset Refinance

Asset refinance is a type of finance where you secure a loan by offering the assets you already own as collateral. These assets can be properties, equipment, vehicles, or account receivables. A bank values these assets and gives you a loan accordingly. 

The Advantages of Asset Finance for Your Business

The most significant advantage of asset finance is the fact that it allows you to spread out the payments for your assets over a particular period. That will ensure you don’t drain your budget outright. 

The monthly interest rates are mostly fixed, meaning that you don’t depend on the state of the stock market. In addition, the asset itself is often the collateral. If you can’t pay for it, you’ll just lose that asset instead of, for example, your home or car. 

Finally, the asset finance company is responsible for the asset entirely. So, if it fails or breaks down, they have to repair or replace it, not you. That gives you some freedom and security other small business startup loans do not. 

To Conclude

As you have read, Asset-backed finance is a great way to get your small business off the ground quickly. It allows you to purchase equipment or vehicles you wouldn’t have been able to afford otherwise.

We hope this guide tells you everything there is to know about asset financing and allows you to make a great decision for your business. 

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