12/07/2011

By Jon Emin, Head of Finance at Conjungo

What is asset finance?

Very simply, this means partnering with a finance company who agrees to pay your suppliers for the assets you wish to purchase. The finance company will enter into an agreement with you for you to repay them over an agreed period of time. The finance company’s job is to pay for the assets you want allowing you unrestricted use of them during the finance period.

Why should we consider finance?

There are a number of reasons why companies finance the purchase of assets. These include:-

Preserving cash that is generated in the business for much better uses such as product development, hiring new people, marketing, and acquisition of other businesses. All these areas should generate a much higher return on the money invested and it is therefore a significantly better use of your company’s cash.

A finance facility means you can acquire assets whenever you want them rather than when your budgets allow you to purchase them. Payment terms can be moulded to suit your cash flow i.e. payments can be stepped up and down at times when your cash flow allows. If your company already borrows to finance the growth of your business, then this is a very effective way of securing an additional credit line which does not impact on those already in place with the bank.

All payments to the finance company are offset against profits. This means that the tax you pay on your profits is reduced. If you were to purchase the assets with your own cash then you are still able to offset an element of the cost against profits, but it takes many more years to get the same tax position.

Once your assets are financed you should be able to extend the facility to add any new assets required by simply extending the term or increasing the monthly payment.

What can we finance?

The simple answer to that is, that you can finance almost any asset purchase if you can demonstrate an excellent method of making the repayments. If you have a strong case for being able to make the payments then there will be a way of obtaining the finance you need.

To find out more on this topic, visit conjungo finance


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