The days of you waiting endlessly outside the bank’s premises only to confirm if your loan application has been considered are over. At the same time, you get the liberty of skyrocketing interest rates and timely repayment. But how? It’s all due to the arrival of exceptional asset financing.
Asset financing refers to the process of receiving funds to purchase assets. Nowadays, it’s a savior for multiple sinking businesses, whether seeking expansion or wishing to acquire equipment. Therefore, it comes in innumerable forms and shapes.
The idea is to serve something for every budget, preference, and requirement. Before you consult an asset finance broker in the UK for further details, it’s wise to identify different types of asset financing. This way, you can make a sensible yet well-informed decision for your cause.
So, let’s get started.
- Equipment Leasing
It’s one of the most simplified forms of asset finance where a business can rent equipment from the leaser for a certain period. It usually works by a fixed payment period, and the business has two options at the end of the lease term.
It can purchase the equipment from the leaser or return it to renew the lease. All in all, it makes a wonderful solution for those seeking operational aid on a budget.
- Hire Purchase
The next call is for the hire purchase, where the borrower makes regular payments to the financier over a certain period. The buyer must make a down payment and installments until the entire asset cost is paid off.
The financier will retain the ownership of the asset until the final payment is made. Hire-purchase contracts are commonly used for buying vehicles, furniture, and other expensive assets. Once all the payments are cleared, the ownership of the asset will be transferred to the borrower.
- Finance Lease
In a finance lease, the financier purchases an asset and lets the borrower use it for a specific period. Yet, the borrower has to pay regular lease rentals during the rental period.
At the end of the session, they can purchase the asset at its residential value. It’s a great opportunity for startups with insufficient capital but an ambitious approach.
- Operating Lease
Another type of asset finance is the operating lease, where the lessee isn’t liable to take full financial responsibility for the rental asset. It means that the leaser is responsible for the maintenance and repair of the asset throughout the term.
Operating leases are usually used for equipment and vehicles needed for a short period. Unlike others, this lease agreement is inexpensive and has less financial responsibility.
- Vendor Financing
Vendor financing is a form of financing where the vendor of products and services provides financing to the purchaser. It benefits both parties by allowing the purchaser to obtain the goods and services they need without paying in full.
Vendor financing includes the vendor providing a loan or credit to the purchaser, which the purchaser later uses to make the purchase. The terms and conditions will be generic yet may include interest rates and repayment schedules.
- Asset-based Lending
Asset-based lending is all about using the borrower’s existing assets, like account receivables, inventory or equipment. The purpose is to secure some of your possessions as collateral. The amount of the financing is usually tied to the value of assets.
The lender will determine the borrower’s assets when providing the loan. The type of lending is often opted by companies with significant assets but there’s no credibility to obtain banking loans.
What’s more impressive is that it’s a flexible financing option with the amount of loan increase or decrease.
- Real Estate Financing
Real estate financing enables entities to acquire or refinance a real estate property. It can be done through various loan structures like mortgages, and commercial property loans.
Overall, this type of financing depends on the requirements of the borrower and the type of property being financed.
Although real estate financing can be complicated, it allows individuals to redevelop properties to generate revenue and value overtime.
Wrap Up!With so many financing options, you’re not getting short anytime soon. It ensures that you may achieve financing for whatever reason you need. At the same time, asset finance and finance lease processes have never been easier with secure terms and monetary gain. Therefore, let go of the traditional lending practices and give asset financing a shot.