What is it?
As it's name implies, Asset Finance can be used to fund virtually any form of business asset. For example, from multi million pound Heidelberg printing presses, CNC Milling Centres, Powder Coating Ovens, to the latest in telephone systems, or IT Hardware and Software. It's not just for cars and vans !
How is it different to a Business Loan?
With Asset Finance, the lending is secured against the Asset itself and normally no additional security is required, if there is an established, profitable trading track record (Directors Personal Guarantees may be required if this is not the case).
What is the Application Process?
There are no complicated forms to fill out, or cashflow projections, or business plans. We write the finance submission for you. All we need are details of the asset being purchased (including where from), the last set of annual accounts, and up to date Management figures (or the last 3 months bank statements if no management accounts). If the submission is simple, a decision can be obtained within a few hours, more complicated ones take 24 - 48 hours. We also have direct access to the Underwriters, so we can discuss your application with them if need be.
Regulated lending is for Private Individuals, Sole Traders, or Partnerships borrowing up to £24,999 and is governed by the Consumer Credit Act. Unregulated Lending is for Limited Companies, Clubs, or Private Individuals, Sole Traders, Partnerships borrowing £25,000 or more
At the end of the agreement, upon paying a Final Option to Purchase fee, (shown on the finance documents) Title of the Goods passes from the Finance Company to the borrower.
VAT is paid on a monthly basis (rather than all up front). It is possible to claim ½ the VAT on Car repayments (if VAT Registered), whereas no VAT can be re-claimed on a car if it is bought under a Hire Purchase scheme.
Under the terms of a Lease, title of the goods stays with the Finance Company. At the end of the agreement there are a number of options:-
- A) Sell the Goods to an Independent Third Party (you will retain most of the sale proceeds, but a small % is payable to the Finance Company
- B) Go in to a Secondary Period Rental. You continue to use and hire the goods in question, by paying one normal monthly rental and that covers it for a whole year and you can do this ad-infinitum
- C) The Goods for have no residual value and are written off (e.g. Computer equipment)
Normally applicable to cars and vans, lorries (but some equipment). A period of hire is agreed upon with annual restrictions to the mileage, with the possibility of adding optional maintenance / servicing. At the end of the Hire Period the vehicle is handed back (some Finance Companies give the further option of being able to purchase the vehicle).
If you exceed the vehicle the mileage restriction, or if the vehicle is handed back with more than just "normal wear and tear" damage, then the penalty clauses can be costly.
Some businesses experience regular seasonal variances and quiet periods. E.g. Agriculture or the building trade. We can structure your repayment profile to take into account of these busier / quieter months.
By setting a Balloon, or Residual value, it is not necessary to repay all the Capital during the initial repayment period.
The Balloon / Residual Value amount becomes payable in one lump sum at the end of the agreement (it is possible to refinance this amount over a further period). This has the benfit of lowering the normal monthly repayments by deferring some of the capital until the end.
However the usual practice is to Part Exchange the old vehicle against a new one. As long as the Part Ex offered, is greater than the balloon value, then there is a surplus / equity to be put towards the new deal.
The information contained within these pages is for general information only and there is no comeback upon the author, or their business for any wrong advice
- Asset Finance
- Business Loans
- Cashflow Finance
- Commercial Mortgages
- Marine Mortgages
- Vehicle Sourcing
We'll call you
Enter your details below to receive a call from a VAFS representative.