Asset Finance

Tuesday, March 23, 2010

An Overview of Asset Finance and Its Various Types

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Asset finance allows companies to collect funds for the purchase of assets they might need to make their businesses run successfully. At times, paying a huge amount of cash at one time for buying assets can be really hard to manage.

Moreover it would significantly affect the company's working capital. With asset finance one can raise the capital to buy assets and the money can be returned to the finance company through regular payments over an agreed period of time.

Asset finance can be used for purchasing new and used cars, coaches, light and heavy commercial vehicles, plant machinery and office equipment. With the help of asset finance solutions, you can buy equipment for your business without spending a large sum in one go.

In other words, it saves you from the trouble of arranging a large amount of capital for buying much needed assets.

Major Types of Asset Finance Available in the UK

Hire Purchase

This typical credit facility is readily available where the financier allows the hirer the right to possess and use an asset in return for regular payments. Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier.

After the hirer pays a deposit of 10-20% to the finance company, he can take the asset directly from the supplier. After a balloon payment is made at the end of the term, the title of the goods is transferred to the hirer.

Lease Purchase

Lease Purchase is often confused as a regular lease. It is similar to a hire purchase agreement with the only difference being that in a Lease Purchase the hirer needs to pay a deposit of 10-15% as a multiple of the repayments. The payment for the remaining balance and interest is done in instalments.

Moreover, a Lease Purchase agreement is based on either a fixed or variable rate. The monthly instalment can be reduced by the inclusion of a balloon.

Contract Hire

In Contract Hire, a rental agreement is made between the supplier and the customer. Here the customer hires the asset for a fixed period of time and after the completion of the period, he returns the asset to the supplying dealer. With contract hire, the customer gets the chance to use the new asset without the risks associated with ownership.

Finance Lease

With finance lease, one can get up to 100% finance for the acquisition of plant equipment required in a business. Here, the ownership of the goods remains with the finance company which rents the goods to the hirer over a predetermined period.

Initially, the hirer needs to pay the documentation fee and an initial payment of a multiple of rentals. The remaining cost of the asset is paid back over the agreed time period.

Operating Lease

Here an agreement is made to rent the asset for business purposes for a predetermined period. At the expiry of the agreed lease, the asset is either returned to the financier or an offer to purchase it for a mutually agreed price is made.

One major line of difference between an operating lease and a finance lease is that the primary rental period for an operating lease does not cover all the capital costs and the hire charges.

Looking at these various types of asset finance, it would not be tough to choose one for buying expensive equipment without forking out a huge sum of money at one go. But it is essential to understand asset finance and its various types properly before applying for it.

There are many finance companies that can help one to get competitive and tailored asset financial solutions to suit one's personal and business requirements.

It is advisable to take professional help to avoid any sort of complications in the future. One can take help from any reputed asset finance based consulting company to get a better deal for one's business.

Mark brown is working as a consultant in a reputed asset based financing company in the UK. As an amateur writer he writes on business and finance with special reference to asset finance and its various segments.

Article Source: http://EzineArticles.com/?expert=Mark_S_Brown

Labels: overview asset finance, types asset finance, various asset finance

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Sunday, March 21, 2010

Asset Finance Leasing - Appropriately Use Assets Without Owning It

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Any particular organization requires an asset to have a smooth running of its business. Without it, production will stop and it will lead to loss.

At any point of time the company may have to face a situation where in a new asset is required but it does not want to put pressure on the dwindling finances. It can also be that the asset or equipment is required for short time duration and procuring it is not a viable option. In that case, the companies can opt for asset finance leasing.

Asset finance leasing is a way through a company can have access to the assets without procuring it. By resorting to this option the company or organization can utilize the assets without spending any cash from its own resources.

Companies who are looking for this process can have two readily available options. The options are direct lease and sell and lease back. Under the option of direct lease the company identifies the particular asset which can be new or pre owned, as per the requirement of the job.

Then in turn the company will ask a leasing company to buy the required equipment from its manufacturer or owner. After the leasing company had bought it, it will lease the equipment as per the terms and conditions.

On the other hand, under sale and lease back option, the company will sell the particular asset to the leasing company and they in turn will lease the equipment back to the company. It is to be remembered that in both the cases, it is the leasing company who owns the asset.

However, the company has also the provision of having a hire purchase agreement with the lending authority and can get back the asset by clearing all the payments.

This type of leasing is preferable when the company wants to utilize the asset to enhance the production on a short term basis. Other wise it is better to avail a loan and then purchase. The company opting for asset finance leasing must try to understand the various aspects of the leasing company before opting for it.

Richie Morgan is offering loan advice for quite some time. Asset Finance UK has a vast network of lenders who provide loans to the borrowers at lower APR. To find Asset Finance Leasing, asset finance, asset based finance visit http://www.assetfinanceuk.net/

Article Source: http://EzineArticles.com/?expert=Richie_Morgan

Labels: appropriately asset finance, asset finance leasing, owning asset finance