Asset finance allows businesses to obtain equipment or asset without having first accrued the capital they need. There are many different types of asset finance to choose from. Here is a quick overview to help understand the different types of asset finance.
With a Finance Lease, the lender owns the asset, however you are responsible for disposing of the equipment at the end of the contract. Finance lease is suited to businesses with rapidly changing technology or equipment. Payments are flexible, carry a residual value, and the term is typically up to five years.
Operating Leases are often used to fund several different assets. Payments towards this type of finance can sometimes be considered operating costs. Please speak to your accountant or tax advisor about the tax benefits of operating leases.
Fleet Operating Lease
Under a fleet operating lease, the lender owns the vehicle and you must return it at the end of the contract term. Term vary between 12 months to 5 years. Repayment are typically fixed and include registration, insurance, service and maintenance.
Suited for businesses with rapidly changing technology, who don’t want to use their working capital, and are comfortable with renting rather than owning technology. Under a technology rental agreement, the lender owns the equipment and the client returns it at the end of the term, usually within 3 years. The repayment can be adjusted to the business seasonal cash flow if needed.
With Chattel Mortgages, you own the asset from the outset and your loan agreement is secured against the asset. The term is typically up to five years. Other payment options can include a deposit and a larger final installment or residual payment. At the end of the term, the security is removed from the asset. You can also structure payments to suit your business and cash flow seasonality.
We advise you speak to your accountant or tax advisor for more information about the tax implications of asset finance.