This answer is probably best taken direct from the Finance & Leasing Association (FLA) website;
Asset finance is a type of finance used by businesses to obtain the equipment they need to grow. It usually involves paying a regular charge for use of the asset over an agreed period of time, thus avoiding the full cost of buying outright. The most common types of asset finance are leasing and hire purchase.
What types of asset can be financed?
Historically the answer was anything that was Durable, Identifiable, Moveable and Saleable (DIMS). However, the asset finance industry has evolved in recent years and there are now a much wider cross section of lenders, many of whom will take a view on one or more of the“DIMS” requirements.
Assets typically fall into two categories these being classed as HARD and SOFT.
HARD ASSETS will typically be “oil dripping” and will usually have unique identifying marks on them, such as a chassis/serial number. Both new and used equipment can be financed.
HARD ASSETS can include but are not limited to the following;
- Motor cars (new, used, prestige, sports and classic)
- Light Commercial Vehicles (LCV)
- Heavy Commercial Vehicles (HGV’s)
- Agricultural machinery (tractors, combine harvesters etc.)
- Buses & Coaches
- Engineering (CNC) equipment
- Manufacturing equipment (all types of machinery)
- Printing presses and related print finishing equipment
- Recycling equipment
- Yellow plant (bulldozers, demolition equipment, excavators etc.)
SOFT ASSETS as the name suggests, are usually items with a limited re-sale value (or in some cases no second hand value at all). Lenders will term these as “unsecured” assets and a decision on whether to lend against such assets will be based on the strength of the business and/or the availability of any other security (usually Directors personal guarantees)
SOFT ASSETS include but are not limited to the following;
- Audio Visual
- Catering equipment
- CCTV
- EPOS systems
- Garage equipment (compressors, MOT diagnostic, ramps etc.)
- Gymnasium equipment
- IT hardware & software
- Medical equipment
- Office Furniture (to include fit outs where costs may include air conditioning, carpets, floorings, partitions etc.)
- Scaffolding
What period of time can hard and soft assets be financed over?
The standard terms are from 12 months to 60 months (1 – 5 years) but good quality hard assets can invariably be financed over periods of up to 84 months (i.e. new buses, coaches and some items of yellow plant).
What types of business can benefit from asset finance?
- Sole Traders
- Partnerships
- Limited Companies
- Limited Liability Partnerships (LLP’s)
- PLC’s
- Start ups
- MBI/MBO “type” businesses to include those in a “turnaround” or “distressed” position
