Asset financing is nothing new – a mortgage, for example, could be considered to be a kind of asset financing solution. Asset financing in this context, however, refers to the kind of financing a business may undertake; indeed, it’s the perfect solution for a business, especially one that’s just starting.

The main purpose of asset financing is to make it easier for a business to manage its cashflow – and as any experienced business owner or manager will testify to, it’s the cashflow of the business that will determine its success or failure. Cashflow is the life-blood of a business; a positive cashflow allows the business to grow, whilst a negative cashflow brings the enterprise into a negative spiral that could spell doom. But what exactly is asset financing, and how does it apply to business? Here’s how asset financing can help with your business cashflow and bring other much-needed benefits.

Buy what you need

It’s actually a simple deal – you can buy what you need and spread those costs out over time – there’s no need to put all the money down at once, neither do you have to get a loan and negotiate with banks. If your asset is a necessity and will help you become more productive (and hence, create more income), the asset could very well pay for itself. It allows a business to buy necessary vehicles, equipment, or machines without harming cashflow.

Flexibility is key

The financing is often provided by institutions that understand your business – which means you are more likely to get a flexible deal relative to a finance solution offered by banks. This flexibility (being able to negotiate your own terms) makes it much easier and provides safe cashflow.

You have support

The finance institution that allows you to engage in asset financing also has your best interests in mind – their interests are linked with yours, after all. This often results not only in financial benefit, but in you receiving invaluable advice as well.

There are tax benefits!

Yes, the government will support you! Because you are paying a monthly bill to buy and secure an asset, your expenses are classified as ‘capital allowances’ – at the end of the year, this can make a very big difference in your obligations to the treasury.

The greatest advantage of asset finance is, of course, the ability to purchase equipment, machinery or vehicles that your business desperately needs but is unable to afford at the moment with a traditional purchase. But the advantages go far beyond that, and depending on your business model, it’s possible to grow exponentially simply because your cashflow looks much healthier. Asset financing can provide stable growth and makes what was once difficult a lot easier.

Image attributed to Stuart Miles/