a more INTELLIGENT approach to equipment finance

The different types of asset finance

Asset finance is a popular choice for businesses looking to acquire new equipment. It can provide a variety of options without the burden of an outright purchase.

Many British manufacturers look towards specialist firms to provide the support needed to fund growth and future development. Asset finance providers are thought to provide a level of flexibility that most banks cannot offer, hence the reason that asset finance remains one of the 1st options for UK manufacturers.

What type of asset finance is right for my business?

There are three principal types of asset finance offered to UK manufacturers. Depending on the specific nature and requirements of your business – not every option will be right for your business needs over the long term.

Finance lease – The customer must be committed to paying 100% of the asset cost plus any interest incurred over a fixed period. Note – you will not be permitted ownership of the asset at the end of the lease. Thereafter, you will need to pay the extension rentals if you require continued use of the asset. Seek to negotiate a minimal sum.

Hire Purchase – This option also requires customer commitment of 100% of costs, plus any interest over a fixed term. But here – you have the flexibility to purchase the asset at the end of the lease for a nominal purchase fee.

Finance lease and hire purchase are both popular with many British manufacturers as they often give a level of certainty around total costs, and you can retain control of the asset and access to any equity that may still reside in the equipment. However, in any event, most banks may be able to provide lower funding costs for loans which often have the same characteristics.

The final of the three options is often seen as the most flexible to manufacturers of equipment – as you can set the contract term to fit the specific timescale that you require the use of the machinery. If you do not expect to use the asset for the last 20% of its life, why pay for that portion?

Operating lease – The customer only needs to commit to a fixed term and not the full cost of the asset. This option poses more of a risk to the Lessor as there is always a possibility that the asset could fall in value come the end of the lease term. The customer, on the other hand, has a higher level of flexibility – as you can keep the equipment in your possession for as long needed, with the option to buy at the end of the term.

Roy Royer from Somerset Equipment Finance states “Our strengths lies in our ability to research asset classes and take a much more nuanced risk in the asset. Most other Lessors will take no asset risk at all or play in very safe spaces.”

Here at Somerset equipment Finance, we will visit your site personally and speak with your key personnel to gain a full understanding of your business and nature of operations. We believe that this is the only way to give your business what it needs. No gimmicks, no time wasting.

About Somerset Capital

For more than 35 years, the Somerset family of companies has redefined equipment finance. We take our clients further by providing services around the financing of equipment for mid-sized and large companies throughout the Americas, Asia and Europe. From equipment needs starting under $100,000 and reaching to $25,000,000 and beyond, our unique asset-driven solutions bring a more intelligent approach to your commercial equipment requirements. Learn more about how Somerset helps clients go beyond finance by going to www.somersetcapital.com/solutions.