How to Finance New Business Assets

Most small and start-up businesses find it difficult to find the cash reserves to fund new business assets. Despite this, sometimes it is essential to purchase new infrastructure, either to expand the business or to keep up with new innovations in your sector. Fortunately, there are a number of ways to finance new assets which do not involve your company relying on existing savings or putting too much strain on cashflow.

Perhaps the most popular method of financing new assets is to enter into a hire purchase agreement. This form of asset finance can take various different shapes, but generally involves the immediate use and operation of the asset, which is still owned by the lender. Regular payments are made by the business to the lender, until the cost of the asset and the interest on the agreement are paid off. At that point, ownership is usually transferred to the business. The advantages of this method are clear, particularly for infrastructure purchases which are essential for the immediate operation of the business. Without having the cash reserves to buy the asset outright, a business can still utilise it until all of the payments are made.

If your business is fortunate enough to already own other pieces of significant infrastructure, it is also possible to pursue asset finance using the opposite method to a hire purchase agreement – namely, asset refinancing. Here, you sell back a piece of existing infrastructure to a lender, in order to release an immediate lump cash sum to buy the new asset required. You make regular payments to the lender on the old asset, in exactly the same way as a hire purchase agreement, regaining full ownership of it once all the payments are completed. The choice between a hire purchase agreement and asset refinance really depends on your overall cash needs, and the terms on offer. One type of asset finance may be more appropriate than another, depending on the particular circumstances of your business.

Of course, financing new infrastructure can be achieved through more general methods of investment, as well as through asset finance schemes. As well as asset refinancing, you can approach your bank or finance agency for a secured loan, based on the infrastructure you already own. You may also, depending on the overall financial health of your business, be able to secure a traditional loan. This is particularly the case if you can demonstrate that the asset you are looking to purchase will enable you to grow your business and repay the loan in plenty of time. Securing bank finance, however, is not as easy as it used to be. You may also wish to seek outside investment from so-called ‘business angels’. If banks cannot be persuaded that your business has a plan for growth, seek out experts in your sector and make the case to them! If the asset you are seeking is vital, there should be some way of securing financing to purchase it.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

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