Have you ever had to give up on your dream of expanding your business due to a lack of finances? Many business owners face the issue. Most often, the only way out is to seek funding from traditional banks.
Yet, it was as daunting, time-consuming, and expensive. The heavy interest rate, inflexible payment options, and hefty collaterals were enough to scare the candidates off.
But don’t worry, as there’s a new solution in town – asset financing! With the help of a professional asset finance broker in the UK, you can now easily secure profitable funding.
Before you decide if asset financing is right for you, it’s essential to understand how it works.
What Is Traditional Banking?
When it comes to funding, traditional banking is the way to go. It’s been around forever and remains the most popular option.
You apply for a loan or line of credit, and the bank will look at your credit score and other factors to determine if you’re eligible.
If you are, you’ll need to put up collateral, like your house or car, to secure the loan. The bank will lay out the loan terms, and you’ll make regular payments.
Also read about Tallyman Axis and how does it work.
What Is Asset Financing?
Asset financing refers to lending that allows businesses to receive the assets they need to operate. It can be any equipment, inventory, vehicle or real estate items. It will enable acquiring assets without paying the total purchase cost upfront.
Instead, the business will make regular payments over a certain period, often with interest. It helps companies to conserve their cash flow and invest somewhere important.
Asset financing benefits lenders by providing them with tangible assets. It reduces the risk of loss if the borrower becomes a defaulter.
While both the funding options possess unique pros and cons, asset financing appears to have the upper hand. Let’s determine how!
- Specific Purpose
Traditional banking is known for offering loans without necessarily knowing the reason for the funding. On the other hand, asset financing always comes with a specific purpose.
Whether you’re looking to expand your transport network with new vehicles or upgrade your equipment, there’s always a clear motive. It ensures that your funds make a productive investment rather than a leisure activity.
- Preserve Working Capital
Asset financing allows you to protect your working capital for day-to-day operations, emergencies or other needs.
Instead of being tied up in hefty advance purchases, you can just clear payments. Due to this, you won’t be entirely empty-handed in case of a financial endeavour.
- Cash Flow Management
As mentioned, financing assets spread the cost over time through installments. What’s more impressive is the flexible payment options and lower interest rates.
This way, you don’t have to break the bank even when signed up for asset financing. This practice helps you manage cash flow efficiently and avoid significant capital outlays.
- Faster Approval
Asset financing often has quicker approval processes as compared to traditional bank loans. Therefore, you don’t have to keep visiting the faculty to bring your case into their consideration. Ultimately, it enables you to acquire assets promptly, and start the utilization part
- Collateral Focus
As you know, asset financing is secured by the asset being financed. So, you may obtain financing even with a limited credit score or credit history.
On the contrary, traditional banking may require you to reach a certain level of credit score to achieve funding. The difference is that you can still get the funding you need with asset financing.
- Asset Lifecycle Management
Some asset financing contracts include maintenance, repair and replacement options for the financed asset. Therefore, it doesn’t go heavy on your pocket and helps manage the asset’s life cycle efficiently.
However, when purchasing an asset with a traditional loan, you will likely bear all the expenses that tag along.
- Tax Benefits
Specific asset financing deals may offer tax benefits like depreciation deductions. It’s a major contribution to reducing your overall tax liability.
So, it’s a win-win situation even with heavy machinery finance. On the flip side, traditional banks do provide much feasibility regarding taxation. So, stay mindful when making a decision.
It’s A Wrap!
As a business owner, receiving funding can be a huge relief and help skyrocket your dream venture. However, it’s vital to be fully informed of the terms and conditions of each funding option. While asset finance may seem the go-to choice, it’s always wise to do your due diligence.