Asset finance can be an excellent business tool. But when is it right for you?

Asset finance allows a company the full use of an asset without tying up valuable business capital. It can be used by a company that needs new equipment, or to release value in assets already owned.

Asset finance can be an excellent tool for rapidly growing companies in purchasing new equipment - and/or those which need cash-flow quickly through unlocking the value in existing assets. And in today's tough economic climate where cash and investors are harder to come by than ever - a cash injection through the realisation of value in capital assets can be invaluable.

The details of lease agreements to provide asset finance vary. With a direct lease, a company agrees the purchase of an asset then arranges for the finance company to buy it and lease it back, whereas with sale & leaseback, the asset already owned by a business is sold to a finance company which then rents it back.

There are downsides of course. Ownership of the asset/s being financed is with the company providing the finance - which in turn grants right of use for a specified period. This means that you pay "rent" (regular lease payments) on the assets your company which impacts on profits. All forms of asset finance or leasing are rental agreements with the finance company.

So it's essential to seek expert advice when you're considering asset finance - whether to ease cash-flow or to buy new equipment. An expert will be able to analyse your individual company needs and advise on the best possible course of action. Factors such as past and future profitability, anticipated business growth rates, cash-flow and balance sheet strength will all have a significant impact on the suitability and specific format of asset finance.