Asset finance is a type of finance that businesses can use to pay for equipment, machinery, vehicles and other assets that they could not typically afford to buy outright.
There’s a few things you need to know about asset finance, which we’ll cover right away:
- The lender owns the asset. The lender (like us) purchases the asset you want. You then pay off the cost of the asset in instalments.
- You only own the asset afterwards with a Hire Purchase agreement. With lease asset finance agreements, you pay the depreciation on the asset plus interest. Some leases have an option to buy at the end, others do not.
- The lender gets their ROI from the deal by way of interest. Interest rates vary but are extremely competitive in this market. At Nationwide Corporate Finance, we offer introductory interest rates from just 3.6%.
- It’s also important not to get refinancing mixed up with asset finance. Refinancing is a way of releasing capital in a business by refinancing existing (older) assets. Asset finance is finance for acquiring new assets for a business.
How does it work?
You should now understand the basic premise of asset finance (you choose an asset for your business, we buy it for you, you repay us for the asset over a term). There’s more to the process than that though, which we’ll shed light on below.
The process begins with applying for finance. We review all applications individually and require proof of an ability to repay. With asset finance, we’ll review the cost of the asset or assets and your ability to pay for them.
We approve applications within 48-hours, and sometimes in less than 24-hours. We approve most applications because most are complete when they reach us and satisfy our lending criteria. It’s important to point out this differs between lenders. Some lenders use automated online systems that simply say “no”. It’s always best to apply with a lender like ourselves to ensure a fair decision process.
Purchasing the asset
Once we have approved your application for finance, we will purchase the asset. This will be delivered directly to you. The lender will own the asset throughout the agreed term. If you take out a Hire Purchase agreement, you will own the asset once all your repayments have been made. If you take out a lease agreement, you will not own the asset. You may be given the choice to finance the remaining balance after the term, however.
What are the repayments?
Repayments are monthly and have a fixed-rate of interest. The cost of your monthly repayments depend on the total cost of the asset. They also depend on the term you take the finance out over and the interest rate you get.
Typically, asset finance is provided over 1 – 5 years. However, this can be longer and especially with assets that are very expensive. The important thing to remember is we can tailor your repayments to suit you.