For a small business, asset finance allows a business to get the equipment that is needed so that the business can operate and do what it needs to.
But normally, the business might not be able to afford all of the equipment that it needs, which is where asset finance comes in. It can also allow you to free up some working capital, in order to use it in other areas of the business, which will mean that you don’t need to take out a large loan to get equipment outright.
Generally, there are two forms of asset finance: leasing and hire purchase. Leasing is all about renting over a period of time, in return for some fixed payments over a set amount of time. So you get what you need, but it isn’t yours, and when the terms are up, you’d have to renew, or give the equipment back. However, leasing can be a good idea for things that cost a lot of money to maintain or repair, or things that can quickly become ‘old’ and outdated, as it can save money long-term. Plus, if you’re not going to use something very much, then leasing could be a better option.
Hire purchase arrangements are when you put an initial deposit towards the cost of the equipment, and then you make payments towards the cost of it all over time. From there, you will then own the items, which would obviously become an asset for the business. This is going to be such a good idea for the things that you use a lot in business, and that you now will last a long time. So you need to think about it all and what is going to be best for your business. There are cost-saving benefits to renting and leasing, as seen in an article like this one: efinancemanagement.com/advantages-and-disadvantages-of-leasing. but it is good to look at the other side of it all too. So here are some disadvantages to think about:
Think wisely when it comes to what your business needs; renting or buying both have their advantages as well as disadvantages.