What is asset finance?
Asset finance allows a business to buy assets without the upfront costs associated with large purchases. Owners often want to grow their business, to take advantage of immediate opportunities or to buy equipment without delay. Asset finance allows you to buy what you need now and spread the cost over several years with affordable monthly repayments. This has the added benefit of not tying up other lines of credit or using all the business’ spare cash. With asset finance a business can add or replace equipment, buy vehicles or refit their premises, enabling them to expand or keep up with the market. A lender purchases the assets a business needs, the business then leases them back through fixed monthly payments over an agreed period.
Asset finance can be provided for ‘hard’ assets such as machinery, equipment, plant or vehicles, as well as ‘soft’ assets such as new technology, CCTV, POS systems, fitness, catering or vending equipment, as well as premises fit-outs, furniture or even air-conditioning.
How asset finance works
When a business needs new equipment, they identify what is required and who to buy it from. They then contact Portman to discuss their finance options. Depending on the goals of the business and the trading situation, customers decide whether finance lease or hire purchase is right for them. Based on the chosen option, a finance proposal is put together on behalf of the customer. The preferred lenders, including potentially ourselves at Portman, will review the application and decide whether to make an offer. The most favourable terms available to a business are secured, deposits, monthly repayments and security are agreed, and a financial agreement is put in place.
During the repayment schedule any asset remains the property of the lender. At the end of the term, options vary depending on the finance agreement in place. Hire purchase customers buy the asset outright for either a nominal fee or balloon payment. Lease finance customers can continue renting, hand the assets back or usually can arrange purchase of the items for an agreed fee.
Portman is both a lender and a broker, and has been supporting UK SMEs with asset finance for over 15 years. We are well-placed to find the right deals that will help your business grow.
What are the main differences between lease finance and hire purchase?
With both HP and equipment lease finance, an agreed amount is paid to a lender each month over a defined term in return for use of an asset. With lease finance, deposits are not usually necessary. The interest and VAT amounts are included in the monthly fee and at the end of the term the customer can keep renting, give the item back to the lender, or often arrange for the purchase of the item for an additional fee.
Hire purchase usually requires the VAT to be paid upfront as well as an initial deposit, and at the end of the term the customer will buy the asset either through a nominal fee or balloon payment, depending on the option chosen.
Lease finance is a rental agreement and so the payments can normally be deducted from company profits before tax is calculated. Hire purchase is, as the name suggests, a purchase and so only the interest payments can be deducted from company profits, but capital depreciation can be applied. Please seek professional tax advice before deciding which is best for you.
How much does asset finance cost?
The interest rates available to each business can be very different because individual circumstances, credit history, business performance and the type of asset being purchased all affect the rate. Being both a lender and a broker, Portman can explore the market on your behalf and choose from multiple providers. We then find a single deal or combination of deals that most closely match your business requirements.
Why would I use finance?
- Buy what you need now
- Invest in new machinery, equipment and vehicles
- Preserve existing credit lines
- Spread your costs with fixed monthly payments
- Potential tax advantages
- Avoid price inflation
- Boost cashflow for operational cost and contingency
- Enable business growth
- Secure fixed competitive rates
- Protect your personal wealth
We can fund almost any sort of asset, be it a traditional ‘hard’ asset such as machinery, tractors, forklifts and vans, to more ‘soft’ assets such as IT software, office supplies, gym equipment and furniture.
We’re able to finance assets in almost any industry, not just the ones listed on this site, so whatever asset you need to move your business forward just contact us and we’ll be happy to help.
On the contrary, asset finance is designed to spread costs over a period of time, whilst your new equipment generates revenue. Using your business’ cash or credit card and buying outright can mean that there’s no free cash for emergencies or to cover fluctuations in demand. Using finance helps even out the monthly budget and choosing a lease finance or hire purchase deal allows you to treat tax in different ways which may suit your business better.
Finance allows you to get what you need now, rather than waiting to buy outright, this helps avoid inflation, as you buy at today’s prices and means you have use of the asset immediately to help grow your business.
Whilst banks can offer different rates, they often reject certain types of purchase, businesses in different industries and can have strict lending criteria. At Portman we deal with a panel of over 40 lenders as well funding businesses with our own money through Portman Leasing and Portman Commercial Finance. We have access to specialist lenders and specialist types of finance, giving a variety of options and a greater chance of success.
Portman may have rates that are not available to a customer who goes direct and can also explore the whole lending market in one go, saving you valuable time and effort. We also have access to many specialist lenders that are not available to customers directly and can even put together finance packages from multiple lenders. All of which gives you competitive rates, with a greater chance of acceptance.
Terms are available for up to 6 years. Options available to you may be dependent on the circumstances of your business or the asset being financed, but then the final choice is up to you.
Yes, where there is a material and predictable seasonal fluctuation in trade, it is possible to arrange a tailored finance agreement where the monthly payments reflect the seasonality of the business’ income. Whilst this is not a typical ‘whole market’ product, where it is required by our customers we do have access to lenders where this type of finance can be arranged.
The amount that you are able to borrow very much depends on a combination of the current and historic trade of your business and, depending on the strength of your business, your own personal circumstances. Our customers typically obtain finance between £10,000 and £2,000,000.
Typically, Portman can only finance companies registered and operating in the UK or the Crown Dependencies of the Isle of Man and the Channel Islands.
Excellent communication and help throughout the process. Easy and prompt emails. Highly…Daniel Cooper
Portman and the entire team are great to work with, know their lenders and products incredibly…Marney Howe
Very smooth operation
I have now dealt few times with Portman Finance and it has always been very smooth and…Anthony ienco
We used Portman Finance to secure finance for a new restaurant we are opening. Jack Weston…David B