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What type of finance do I need? | Portman Asset Finance

Business finance is not one size fits all. There are several options of loans and agreements, each designed to support businesses in different ways. Find out what your choices are.

Business finance: What are my options?
Business finance offers a cash injection into a business and is repaid with interest in instalments (usually monthly) over an agreed period. Finance is typically split into 3 main types: Loans, Asset Finance and Equity Release.

Finance vs Paying Cash
Sometimes opportunities arise suddenly, rather than saving up, businesses can get what they need to grow right away. In return, the financed investment allows a business to grow and earn additional revenue whilst making repayments. Taking finance offers the certainty of monthly budgeting, fixed interest rates, and the ability to buy at today’s prices – beating inflation.

Using your business’s cash for large outlays can present some risks. A lack of free cash can mean an inability to pay operational costs including staff wages, stock holding or cope with supply chain or payment delays. Using an overdraft or credit card also uses up a business’s last line of emergency credit making it more difficult to obtain other forms of finance later.

It’s a choice between speed, opportunity and certainty vs waiting and saving to reduce costs.

Business Loans
Business loans can be short-term, medium-term or flexible. Funds can usually be used for any business expense, property, operational, stock, salary or marketing costs.

Short-term loans are usually for less than 2 years, used to ride out a difficult trading period or cover immediate costs. Short-term loans generally have less stringent acceptance criteria and quick approvals are more common.

Medium-term loans usually run from 2 to 5 years and are often used for projects such as refurbishments, buying an array of different items, or jointly to buy equipment and to supplement free cash in the business.

Flexi loans are short-term but with flexible repayment schedules, allowing you to pay a minimum amount then to overpay however much you can afford, with interest only payable until the loan is settled.

Startup Finance
There may be specific equipment, vehicles, stock (or many other things) you need to be able to deliver your service or product to customers. However, you need equipment to start producing or stock to sell to customers, but you need to generate revenue to pay for the equipment. A loan allows you to get started and scale your business far quicker. Startup loans are a great alternative to other financing options such as credit cards or accessing operational costs.

A personal or cross-company guarantee, or other form of security, is most often required for a loan. Asset finance can be easier to obtain where a large piece of equipment needs to be bought, as the asset itself is security for a lender. If you are a new start business, you may find buying hard assets on finance easier than going for a straight cash business loan.

Asset Finance
Asset finance exists to fund high value purchases which would drain cashflow to buy outright. The vehicles, machinery or equipment you need to take advantage of opportunities, often come with hefty price tags. Asset finance allows you to split the cost over smaller regular payments.

With asset finance, the lender purchases the equipment and leases it back to the business for agreed ongoing instalments. This allows you to access tools for growing your business at affordable monthly rates without tying up existing lines of credit or using up cash reserved for other purposes.

The main types of asset finance are Hire Purchase and Lease Finance.

Hire Purchase
With hire purchase, you have a guaranteed option to buy the asset outright at the end of the contract, though it does require the VAT to be paid upfront and often a sizeable deposit. If the equipment will continue to benefit your business, will not need upgrading and will provide lasting value, this may be the best type of asset finance for you. Hire purchase is available with an end of term balloon payment, or without, depending how a business wants to structure the payments.

Lease Finance
Lease finance typically involves a lesser deposit and the VAT is spread over the term, making the initial outlay lower. Monthly payments can also be offset against revenue for tax purposes. Leasing is designed as a rental, involving return of the asset at the end of the contract, though a business can continue leasing the item, or arrange for purchase of the item by discussing this with Portman at the end of the term.

Equipment Refinance
Equipment refinance releases funds this through selling equipment you own outright and leasing it back. This releases tied-up capital and moves the asset’s cost to ongoing monthly payments. The freed-up money can far offset the monthly instalments when used well.

Business Finance Fuels Growth
Finance is a great way to introduce capital to a business. Various funding options can give you access to essential equipment to expand your business’s capabilities. If using to win new contracts, capture new opportunities or expand to serve increasing demand, the financial gain can far outweigh interest payments.

Contact us today
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Portman Asset Finance is a Business-to-Business finance lender and broker regulated by the Financial Conduct Authority FRN719988.