How Asset Finance Can Boost Cash Flow for Growing Businesses

As the saying goes, you’ve got to spend money to make money.

For many smaller businesses (or even larger businesses stretched to their financial limits) this can be a problem.

Raising the capital you need to make significant purchases can take a long time, especially if you’re new to the market.

That’s why many businesses are turning to asset finance as an affordable, low-risk strategy to boost their cash flow and accelerate business growth.

How does asset finance work?

Asset finance is a type of lending that lets you purchase new assets, upgrade your equipment and expand your services.

Rather than pay a large upfront sum for assets you need, you instead offer existing assets or those you plan to purchase as collateral against a loan. You then pay off the cost of the asset and interest over time, typically in monthly instalments.

Depending on the type of asset finance you choose, you can either own the asset or return it at the end of your lease period.

How does asset finance boost cash flow?

Asset finance supports healthy cash flow for growing businesses in a few different ways.

First of all, financing an asset means you don’t need to build up a large sum of cash to purchase it all in one go. Instead, you might pay a small upfront fee, and then you cover the rest of the cost over time.

By spreading out the cost of the asset, you make small, predictable monthly payments, often at a fixed rate of interest. This also makes it much easier to plan your expenses and better manage the finances of your business.

It’s true that financing an asset often means paying more for it overall. But it’s an excellent way to improve your business with assets that are outside of your current budget range.

Since you receive the asset right away, you can immediately put it to use making more money for your business. This allows you to increase your income, often meaning you earn more over the lease period than you end up paying for the asset. So even if you’re paying more, you still come out of the deal in a superior financial position.

Asset finance also lets you retain working capital that you can use to support other areas of your business. You could fund day-to-day operations, expand in other areas or simply maintain a financial barrier against unexpected costs.

This lets you continue growing your business with a reassuring amount of cash in your pocket.

Is asset finance available for small businesses and startups?

Absolutely! In fact, asset finance is one of the best ways for small businesses and startup companies to secure their place in the market.

That said, you should be aware that lenders might scrutinise your business much more closely if you don’t have an established record of success. You could be expected to pay a higher down payment or to meet more stringent application criteria.

However, even with these extra conditions, asset finance is still a highly effective method for growing your business.

You can use the assets you get on finance to provide a better service to more people and increase your profitability. This contributes to your overall success, which can drive down the costs and conditions of asset finance when you borrow again in the future.

What types of assets can you get on finance?

From acquiring office furniture and IT software to financing vehicles and industrial machinery, there’s no end to the types of business assets you can get on finance.

Asset finance is common to almost any industry, including:

Common types of asset finance

Asset leasing: The lender buys the asset and leases it to you. At the end of your repayment term, you can renew your lease, return the asset or buy it from the lender
Hire purchase: You own the asset once your payment period is over. The asset appears as a positive item on your balance sheet, though the lender retains ownership until you’ve made your final payment
Operating lease: Ideal for businesses who only need an asset for a limited time and never want to own it. The lender maintains the asset throughout your contract period, and you might even be able to upgrade it to a newer model during that time
Contract hire: Specifically for leasing vehicles, which the lender sources and maintains during your contract period
Sale and leaseback: You sell an existing asset to a finance provider, who then leases it back to you. This arrangement lets you free capital tied up in the asset while still using it for day-to-day business operations
Asset refinancing: You use existing assets as collateral to secure a loan. This is a great way to release capital to fund other investments or operational needs

What criteria do asset finance lenders consider?

Credit history: A strong credit history reduces risk for the lender
Finances: Lenders review your financial statements such as balance sheets, cash flow statements, and profit and loss accounts to evaluate the financial health of your business
Repayment ability: Lenders will look at your current and projected cash flow to determine how likely are to meet your repayment conditions
Asset type: The initial value, resale value and depreciation rates of the asset influence the lender’s decision
Business plan: A thoughtful plan for how you’ll use the asset to earn money and grow your business makes your application more convincing
Collateral: If you need to secure your loan with collateral, its value will influence how much you can borrow
Industry: Some industries are higher risk than others, which could affect a lender’s willingness to finance your assets

Grow your business with Kane Financial Services

For more than 35 years, we’ve helped businesses throughout the UK and Ireland reliably grow with asset finance.

By working with an independent asset finance broker, you can access exclusive deals that high-street lenders can’t match. That means you can enjoy more favourable terms and interest rates as you grow your business.

Apply for asset finance online to find out if you could qualify, and we’ll get in touch to discuss your financing options.