6 Types of Asset Finance Available to Businesses

There are three different types of asset finance available to businesses, each has its advantages and disadvantages. The three most common types of asset finance are hire purchase, leasing, loans, factoring, invoice finance, and equipment finance.

Hire Purchase

Hire purchase is a type of asset finance where businesses can spread the cost of an expensive item over a period of time, usually between two and five years. The main advantage of hire purchase is that businesses can get ownership of the asset at the end of the agreement. However, the downside is that it can be more expensive in the long run than other types of asset finance.

Leasing

Leasing is a type of asset finance where businesses rent an asset from a financial institution for a set period, usually between one and five years. The main advantage of leasing is that it can be more flexible than other types of asset finance, as businesses can often get a lower monthly payment by negotiating a longer lease term. The downside is that businesses do not own the asset at the end of the lease and will need to return it to the financial institution.

Loans

Loans are a type of asset finance where businesses borrow money from a financial institution to buy an asset. The main advantage of loans is that they can be used to finance a wide range of assets, including property, vehicles, and machinery. The downside is that businesses will need to make regular repayments, with interest, over a period of time.

Factoring

Factoring is a type of asset finance where businesses sell their invoices to a financial institution at a discount. The main advantage of factoring is that it can provide businesses with a lump sum of cash upfront, which can be used to finance a wide range of assets. The downside is that businesses will need to pay interest on the money borrowed, and the financial institution will often have a say in how the money is spent.

Invoice Finance

Invoice finance is a type of asset finance where businesses sell their invoices to a financial institution at a discount. The main advantage of invoice finance is that it can provide businesses with a lump sum of cash upfront, which can be used to finance a wide range of assets. The downside is that businesses will need to pay interest on the money borrowed, and the financial institution will often have a say in how the money is spent.

Equipment Finance

Equipment finance is a type of asset finance where businesses borrow money to buy equipment. The main advantage of equipment finance is that it can be used to finance a wide range of assets, including vehicles, machinery, and tools. The downside is that businesses will need to make regular repayments, with interest, over a set period of time. 

Conclusion

Asset finance can be a useful way for businesses to spread the cost of an expensive purchase and get ownership of the asset at the end of the agreement. However, it is important to compare the different types of asset finance before making a decision, as each has its advantages and disadvantages.