The ultimate guide to asset finance for SMEs

Have you got your eyes on that new CRM your business partner says could help your team grow? Or maybe you’re eyeing up a new Range Rover to add to your vehicle fleet. You might even be considering installing a new batch oven in your bakery to meet ever-increasing orders.  

If you’re looking to acquire or lease assets but don’t want to take the immediate hit to cash flow, you might want to consider asset finance. Here’s a quick beginner’s guide to asset finance to help you get to grips with this powerful financial tool.

What is an asset?

An asset is an item, physical or not, of monetary value owned by a person or business. When owned by a business, there is a general expectation that the asset will provide a future benefit to that business.

Some types of assets, for example, inventory, can be converted into cash or used for their completed purpose within the next year. Other types of assets, like warehouses, are considered to be of more long-term value and are less liquid.

Some examples of assets businesses may hold include:

• Property  

• Vehicles (including boats, planes, and submarines)

• Machinery

• Office printer lease

• Inventory

• Office furniture leasing

• Trademarks

• Software, IT, and technology finance

What is asset finance?

Asset finance is a type of business loan that enables you to spread the cost when purchasing or leasing a new asset. It’s a popular form of financing. In fact, at Funding Options by Tide, asset finance came second out of the products applied for in terms of total amount sought by our 2023 applicants. 

Sometimes, the asset is legally owned by the lending company until you have paid the last instalment. In other cases, you return the asset at the end of the loan term. 

By spreading the cost across a period of several months or years, asset finance enables you to purchase essential equipment or expand operations without depleting cash reserves.

Please note that asset finance typically requires an upfront deposit and there is less flexibility with early repayments.

What is asset refinance?

Asset refinance is a little different. This form of funding enables you to release funds from a currently owned asset. Here, you use an asset already in your possession as security against a loan.

How can asset finance help SMEs?

Whether you’re looking for hire purchase, an operating lease, or a finance lease, asset finance can be a great way to facilitate growth at your SME.

This is because asset finance lets you use essential tools without a big upfront payment–this can have a positive impact on your company cash flow. Not just that, but asset finance is a flexible, accessible form of financing that can provide a safety net. If, say, your equipment breaks down mid-busy season, asset finance means you don’t have to scramble for cash or halt operations. 

Do be aware that in some cases the lender may repossess the asset if you don’t keep up with monthly payments. 

Use Funding Options by Tide to find asset finance

We help match businesses to appropriate asset finance companies. Our network contains over 120 funding providers. Click the link below to find out if we can connect you to an asset finance lender. 

Click here to find an asset finance provider.  

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.