Investing in your business is crucial to securing growth, but, as Managing Director of Portman Asset Finance Alex Read explains, success can be sourced through simple, flexible steps that are tailored to your business needs
What is asset finance?
Well, it makes the process of securing funding for your business cheaper and more cost-effective.
Alex Read, Managing Director of Portman Asset Finance has worked within the asset finance sector for over 10 years and explains just how simple these solutions are for businesses.
“It is a financial tool for business owners to secure new assets that can grow their company. You make fixed regular payments for the use of an asset over an agreed period between 1-10 years – asset finance is now one of the most accessible and flexible sources of funding out there.”
Why should you use this form of finance, though?
As Read explains, it offers unrivalled protection for lenders, so you will save money.
“If you need equipment to start up or expand your business, then asset finance is ideal because you can secure the funding against the asset itself. Use the right product for the right purpose – loans are not linked to assets, for example, and are best used for cash flow or paying for anything unsecured. Payments on our lease finance agreements are also tax deductible, giving customers further savings.”
Shouldn’t I just pay for the asset in one lump sum?
You may think that this will save money in the long run, but protecting vital working capital is imperative to optimise cash flow and protect against any unforeseen circumstances.
“Asset Finance saves you from the cost of buying an asset outright and preserves your working capital, allowing to invest in other business areas. Additional staff can generate the profit to more than offset the 2.5 percent on an asset finance deal,” Read adds.
Why is it so important to preserve working capital?
It is the lifeblood of any successful business and should be secured as early as possible.
“Assets should always pay for themselves. In my experience, people access asset finance when they really need it, but securing the finance proactively will ensure you to retain your cash,” the Portman Managing Director stresses.
Can my company benefit from asset finance?
Any company can benefit from it. Whether you are start-up, SME, or larger entity, asset finance facilitates access to the latest equipment and software across all industries.
“All businesses should be attracted to asset finance due to the flexible repayments on offer, as well as the low rates, tax benefits, and breadth of assets that can be funded,” Read explains.
Tax benefits? By virtue of not actually owning the asset through leasing, hire purchase, or refinance, the cost of purchase is completely tax deductible.
What assets can I finance?
Anything – whether soft or hard. Read continues to reflect on the sheer versatility and flexibility offered by asset finance.
“We can fund any sort of asset, be it a traditional ‘hard’ asset like a tractor, forklift, van, or machine, to ‘soft’ assets like office or gym equipment, furniture, air-con systems, or IT software packages like CAD, Sage, or Microsoft Dynamics.”
How easy is it to get finance; how long does the process take?
It is extremely quick and easy to access – utilising a knowledgeable and well connected provider, that is.
“A broker like Portman is well placed to secure finance and move swiftly because we have a broad spectrum of lenders at our disposal. By offering varying, fixed rates, we can find the right deal for companies in manifold circumstances. We aim to move from initial contact to full activation of transaction in as little as 24 hours,” Read reveals.
What asset finance options do I have and how do they vary?
Portman offers four solutions to you, as a proactive, cash-saving solution is sought. Although asset finance is crucial to securing long-term profits and optimising cash flow, other options are available to you if a simple cash injection is desired.
“Lease hire: Portman buy the asset and you use it over an agreed contract period in return for monthly payments. You can then choose to purchase the asset for a small one-off fee, hand it back, or continue to lease it. Rates from as little as 2.5 percent are available and costs can be offset against tax.
“Hire purchase: This is similar to a lease agreement in that it frees up working capital, however you are the purchaser. After all payments have been made, your business becomes the owner of the equipment, either automatically or on payment of a final option to purchase fee.
“Refinance: This allows you to release locked in equity from your assets. These unlocked funds can then be used as you require.
“Commercial loan: This gives you the freedom to use the monies as you see fit, whether it’s consolidating existing loans, growing your business, or buying another.”
How can I make the most of asset finance?
Ensuring that assets that can improve productivity and improve customer services is key – you need to ensure that you always have USPs to distinguish yourselves from competitors.
“You need to be the best in breed. Asset finance allows you to buy the top-specification coffee machine, treadmill, or whatever it is you need, rather than settling for what cash reserves allow. Customers want to receive quality experiences and service; provide them with the best equipment that sets you apart from competitors,” Read maintains.
How much finance should I seek to acquire?
More than what you need. This may seem counterproductive considering you’ll have to pay more back, but it can ensure that you cover any additional costs you didn’t foresee and cash flow related issues.
Read calls on businesses to rely on the experience of their broker when deciding exactly how much, too.
“No one knows a business better than the owner, however we get the best financial agreements for businesses because of our sector expertise that ensures we can advise on any associated costs – like import duty and VAT costs for overseas purchases, for instance.”
Are my misconceptions about asset finance companies true?
No fears should exist regarding the need, legitimacy, or premises for asset finance. In a rebuttal of the notion that finance is only for entities without the funding, the director explains why reality is the complete opposite.
“It amazes me that there are still people who believe finance is just for people who can’t afford to buy. The reality is quite the reverse – asset finance is designed for ambitious, profitable companies who are looking to grow and reduce tax liabilities.
“Some people also think that going through a broker to arrange asset finance is going to be more expensive than approaching a lender directly. Because of the amount of business we complete with our panel of lenders, we get preferential rates for our customers so the overall cost is actually lower.”
Reduced costs and the scope to increase turnover ensure that successful companies can only prosper further, but it is always worth using the same lender.
I’m looking to fund a variety of assets – what is best option?
Every business needs a bespoke service, therefore having a company that has the ability to broker syndicated deals is key.
“In these cases we tailor a bespoke package of monetary products for the customer. If they are starting a gym business, for instance, we look at the equipment, the fit-out, the member management system and will break all that down and find the best lender for each component. There may be five different lenders making up one overall package for a customer,” Read states.
Overall, even if a business fears quieter periods that could affect an ability to repay, or has specific requirements of funding, asset finance is an aspirational route that will secure investment without the sacrifice of financial capital – ‘lower repayments are possible’ in quieter months, Read confirms.