Funding your business growth can be challenging, particularly for small business. In order to for your company to grow, you’ll eventually need to invest significant sums of capital into a range of new assets. Depending on your company, these could be anything from manufacturing equipment, new computers and software, a company vehicle, or even all of the above. However, even though the tool or service is entirely necessary, the thought of investing so much of your capital into one payment can be a cause for concern. This is why you should consider the options available to you from asset finance.
What Is It
Asset finance providers allow you to rent or lease a variety of equipment rather than the more costly procedure of having to purchase them outright. This can make it easier to manage your company’s cash reserves by instead paying monthly on a contract that suits your business. It’s a more flexible alternative to the traditional bank loan which could leave your company in debt early on its life cycle.
What Are the Benefits
Even if you’re careful about the purchases you make and research the expected life-span of the equipment, they will most likely depreciate in value over time. Leasing the equipment means you have the option of changing the equipment at the end of your contract, or even upgrading mid-cycle. This will make sure your company always has the best equipment possible. Some asset finance providers can also offer fully-inclusive packages which cover otherwise expensive services like maintenance support and insurance.
Asset finance providers are popular amongst all kinds of businesses as the payments can be written off against taxable profits. Purchasing the same equipment outright would mean you could only write off the depreciation and loan interest, which can often be less than what you would pay for your lease payments. Because of this, taking advantage of asset finance could mean your company has a lower tax to pay at the end of the year. While there are special VAT restrictions on some equipment such as vehicles, generally you will only pay for the rentals and not the purchase price. You can then reclaim this VAT, further increasing your cash flow.
Deciding to switch to asset financing solutions could be the boost your small company needs. Rather than having to place a significant amount of your capital in one area of your business, it’s monthly contracts will free up cash flow and allow you to spread capital into a number of areas.