Asset finance: What is equipment finance?

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In our last post we shared more about hire purchase and today we are answering the question; what is equipment finance?

What is equipment finance?

Equipment finance or equipment leasing is a very popular finance option and allows a business to obtain the machinery or technology that they need. Whatever your sector there will be assets that can help grow your business – from plant machinery to office equipment and company vehicles.

This type of leasing is essentially when a lessor rents out equipment, or assets for a monthly fee

How does it work?

The lessor is classed as the owner of a piece of equipment and they will essentially rent out this equipment for a set time period through monthly payments. The lessee can use the equipment but the lessor will have ownership of it. At the end of the agreed term, you may continue to lease the equipment by making further payments, upgrade the existing equipment or return the asset.

Advantages

• It helps with cash flow as you don’t have to pay the full cost of the asset upfront

• You can access the latest equipment, which might be too expensive for you to buy outright. This is a big advantage for a company hoping to thrive and grow.

• Set monthly payments make it easy to budget

• The leasing company carries the risk if the equipment breaks down

• It’s a great option for companies who only need specific equipment for a limited period of time – the equipment can be leased for the short time period that they need it

Disadvantages

• If you don’t keep up the repayments, your lender can take the asset away and your credit rating will be affected

• Leasing requires paying interest, meaning you’ll pay more for the asset than if you’d purchased upfront

• You don’t own the equipment (although may have the option at the end of the lease)

If you are looking for asset finance and would like to discuss your options, get in touch with Dorsia Finance – info@dorsiafinance.co.uk | 01522 420 420. We are based in Lincoln but work nationwide.

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