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FINANCE OPTIONS
MAKING SOUND INVESTMENT DECISIONS CSL Managing
Director Mike Graham answers a few key questions about the type of finance options open to businesses of all sizes, and explains how the best option depends on the customer's needs and what is most suited to their business
here are thousands of businesses that could compete far more effectively and significantly boost their bottom line by expanding, adding more production lines or even moving to a larger facility. What often holds them back is cash. In the absence of a massive inheritance, the following Q & A examines what options businesses have. Q. What types of finance options are open to businesses looking to invest in new equipment and systems? A. There are multiple options to choose from - all of which have their individual benefits. These options include Hire Purchase, Lease and even Unsecured Funding. The best option depends on the customer's needs and what best suits their business Q. What is asset finance and what are its advantages? A. Asset finance is financing the cost of business purchases such as vehicles or equipment and spreading this cost according to a preferred term and structure. This has plenty of benefits for any business; for example it preserves cashflow and limits directors’ exposure as security is in the asset itself. Q. Are there different types of asset
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finance? A. There are different types of asset
finance, all with their individual benefits and perks. For example a 'Hire Purchase' agreement will allow the customer to retain ownership of the asset at the end of the agreement, giving the option to sell on the asset, hire it out or even refinance it to release cash back into the business. Another popular option is 'Lease' which means that the customer can give the asset back to the lender at the end of the agreement. In
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addition to this, leasing allows you to pay the VAT on the asset back over the fixed term (eg. four or five years), rather than having to pay this cost upfront. Q. Are there any incentives from Government, or proposed options from the opposition, that companies should be aware of?
types of asset finance, such as ‘Hire Purchase’ and ‘Leasing’, all with their own benefits and perks
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A. Yes, there are options available in the market, the main one being the RLS Scheme where the government guarantees 70% of the finance to the lender. This enables the customer to get a better rate of finance on an asset from certain lenders. Q. How do I know if my business is eligible? A. Customers that have used finance cover a range of sectors and vary in strength of credit. Even businesses that have been trading a matter of months can secure funding on asset purchases. With a large lending panel and a vast lending criteria, any business can be eligible. Q. What type and size of business is most suited to asset finance? A. Naturally large businesses with a strong credit profile looking to finance a ‘Hard Asset’ will see their application progress through the
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process a lot quicker and end up coming out with more favourable rates. However, any size/type business (Ltd or Sole Trader) is suited to asset finance. Q. What sort of machinery can be funded? A. It’s possible to get funding for a wide range of machinery from CNC Machines, Industrial Shredders and General Plant. These are your typical 'Hard Assets'. Conveyors, for example, would be classed as soft assets - which still leaves plenty of funding options and lenders who would be keen to lend against them. Q. Is it possible to mix and match – use part cash and part finance? A. Yes, this is possible: businesses are able to put down any deposit they want depending on what works best for their requirements. Some lenders also offer balloon payments and most lenders will consider staged payments if the asset is in the build process. Q. What amount of funding might be the least and most that could be offered? A. Typically, most lenders will lend a minimum of £10,000 per deal and go up to over £2M (this will vary depending on the lender). Q. What’s a typical time period for a
finance agreement? A. Most deals are over a five-year term which helps keep monthly costs down, but this can be reduced to 12 months or increased to seven years when needed. *Note that the author is not a finance provider and readers should always seek professional advice before making financial decisions.
Conveyor Systems Ltd (CSL)
conveyorsystemsltd.co.uk
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