Asset finance is a form of finance used by businesses to obtain a wide range of items necessary to operate efficiently and effectively within their sector.
This is an excerpt from our free white paper, Winning More Business: Offering finance to your customers. Discover how White Oak UK can help you increase sales, reduce your cash conversion cycle and protect your margins.Looking for fuss-free asset finance to support a purchase for your business? Contact us to discuss your requirements or check if you are eligible for funding.
Wholly or largely secured on the assets being financed, the need for additional collateral is significantly reduced. This gives your customers the flexibility to replace or upgrade assets during, or at the end of, the primary period of the agreement.
By offering asset finance as a way of purchasing your equipment, suppliers can increase sales, reduce their sales cycles and improve their cash flow.
Asset finance you can offer your customers
There are four principal forms of asset financing that equipment suppliers can offer their customers:
1. Finance Lease |
This facility transfers largely all the rights and obligations of ownership to the Lessee (Business) and can be for any length of time. During the life of the agreement the full value of the Asset appears on the Lessee’s balance sheet as an asset and liability, and an element of the rental treated as a business expense and passed through the profit and loss account.
The lessee is responsible for maintaining and insuring the asset during the life of the agreement. |
2. Hire Purchase |
This facility enables a business to acquire the assets they need where the Lessor (Finance Company) purchases the equipment on behalf of the Lessee.
The Lessor owns the asset until the final payment is made and at this point the Lessee is given an option to purchase the asset for a nominal sum. During the life of the agreement the full value of the Asset appears on the Lessee’s balance sheet as an asset and liability and an element of the rental treated as a business expense and passed through the profit and loss account. |
3. Operating Lease |
This facility is suitable if the Lessee will not need the equipment for its entire working life. The Lessor will take the asset back at the end of the agreement and in some cases may responsible for the maintenance but typically maintenance responsibility will reside with the Lessee.
Payments appear in the Lessee’s profit and loss account and as the asset is only kept for a nominated period, it does not appear on the Lessee’s balance sheet. Find out more about our Operating Leases here. |
4. Commercial Loan |
Occasions arise where a customer only requires a short payment period. Businesses need a loan product in these situations. Lenders tailor loan products to meet a customer’s requirements with terms from 3 to 12 months. |
When should Equipment Suppliers offer asset finance?
Put simply, you should promote an asset or equipment finance solution as soon as your prospect shows any signal of an intent to buy.
By providing the benefits and capabilities of asset finance early, it’s clear how it can support their purchasing plans. It will also influence the specification of equipment the customer will ultimately require.
Buyers will inevitably seek out a solution that provides value at a price they are willing to pay. This means that more often than not you are one of several providers looking to win the business.
Promoting asset finance early in the sales cycle delivers greater control. It breaks down the total cost of purchase into manageable payments for the customer. Doing this increases your ability to tailor a solution to meet a customer’s individual requirements.
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