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Monday, March 4, 2024

An Overview of Asset Finance and Its Various Types

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 Asset financing allows companies to raise funds to purchase assets that they may need to run their business successfully. Sometimes it can be very difficult to cope with the simultaneous payment of a huge amount of cash for the purchase of assets. In addition, it will have a significant impact on the company’s working capital. With asset financing, capital can be raised to purchase assets, and money can be returned to the finance company through regular payments over an agreed period of time.

Asset financing can be used to buy new and used cars, buses, light and heavy commercial vehicles, factory equipment and office equipment. With asset financing solutions, you can buy equipment for your business without spending a large sum in one go.

In other words, it saves you the trouble of raising a lot of capital to buy much needed assets.

Major types of asset finance

Purchase by installments

This typical line of credit is readily available when the financier grants the employer the right to own and use the asset in exchange for recurring payments. Here the employer first finds the asset he needs and negotiates the purchase price with the supplier.

After the employer has made a deposit of 10-20% of the finance company, he can pick up the asset directly from the supplier. After the balance payment is made at the end of the term, title to the goods passes to the employer.

Lease purchase

Renting Purchasing is often confused with regular renting. It is similar to an installment purchase agreement, with the only difference that when buying on lease, the tenant must make a deposit of 10-15%, which is a multiple of the repayment amount. The balance and interest are paid in installments.

In addition, the sales contract is based on a fixed or variable rate. The monthly payment can be reduced by adding a spray can.

Lease contract

In the case of a contractual lease, a lease agreement is concluded between the supplier and the customer. Here, the customer hires the asset for a fixed period of time, and upon completion, he returns the asset to the supplier dealer. With a lease under a contract, the customer is able to use the new asset without the risks of ownership.

Finance lease

With a financial lease, you can get up to 100% financing for the purchase of factory equipment necessary for running a business. Here, ownership of the goods remains with the finance company, which rents the goods to the tenant for a predetermined period. The tenant must initially pay a documentation fee and a down payment in multiples of the rent. The remaining value of the asset is paid over the agreed period of time.

Current lease

This is where an agreement is concluded for the lease of an asset for business purposes for a predetermined period. At the end of the agreed lease term, the asset is either returned to the financier, or an offer is made to purchase it at a mutually agreed price. One of the main differences between an operating lease and a finance lease is that the main lease period for an operating lease does not cover all capital costs and lease payments.

Looking at these different types of asset financing, it would be easy to pick one for the high-end equipment purchase without shelling out a huge amount of money all at once. But it is important to properly understand asset financing and its different types before applying for it.

There are many Asset Finance Shop that can help you find competitive and customized asset finance solutions that meet your personal and business needs. It is advisable to seek professional help to avoid any complications in the future. You can get help from any reputed asset finance consulting company to get a better deal for your business.


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