Understanding asset finance: a practical guide for businesses
In today’s fast-moving business landscape, securing the right equipment and vehicles can be the difference between standing still and moving ahead. Yet, many companies remain uncertain about the best ways to fund these essential assets without straining their cash flow. This guide demystifies asset finance, offering clear, practical insights into how it works, why it matters, and how it could help your business grow—drawing on our extensive experience and research to ensure you make informed decisions with confidence.
What does asset finance mean?
In simple terms, it’s a way to fund essential equipment or vehicles without paying the full cost upfront. Instead, you spread payments over an agreed term, helping manage cash flow and reduce initial expenditure.
Asset finance vs asset-based lending
These terms are often confused.
- Asset finance: Helps you acquire or lease equipment and vehicles.
- Asset-based lending: Allows you to secure working capital by using your current assets as collateral, alongside an invoice financing facility.
What counts as an asset?
Items suitable for financing are typically durable, identifiable, and have resale value. They fall into two categories:
- Hard assets: Machinery, vehicles and other items with a strong resale value.
- Soft assets: For example, IT systems, medical equipment. These tend to have a lower resale value and may therefore need extra security.
Vehicle funding solutions
Vehicles are one of the most common items financed, as an expensive but necessary aspect for many companies.
Spreading the cost can make fleet investment more manageable and protect against depreciation.
Why choose this funding option?
Advantages:
- Spread repayments over time
- Improve cash flow
- Reduce upfront costs
- Potential tax benefits
Points to consider:
- Missed payments may result in repossession
- You may not own the equipment immediately
- Additional insurance might be required
Funding options we offer
At Close Brothers Commercial Finance, we provide two main solutions:
- Hire purchase: This option lets you spread the cost of an asset over an agreed period. You make regular payments that cover the value of the asset and interest. Once all payments are complete, ownership transfers to you.
- Finance lease: You can use the asset for the duration of the agreement without committing to buy it. You pay rental instalments for full use of the equipment, and at the end of the term, you can choose to return it, continue using it for a small annual fee, or even sell it and keep most of the proceeds.
Is asset finance right for your business?
Asset finance helps firms acquire the assets they need to operate without the upfront costs and helps manage cash flow. While it provides significant benefits, it's important to consider the risks, such as potential asset loss if payments are missed.
With a clear understanding and expert support from your financial partner, businesses can use this tool to support growth and drive success.
Read one of our case studies for a real-world example.
Products and services are subject to eligibility, status, terms and conditions and availability. All lending is subject to status and our lending criteria. The right to decline any application is reserved.
