What Are the Types of Asset Financing?

Hire PurchaseThis is the most common type of asset finance. Hire purchase finance gives you immediate access to equipment and other assets. You own the asset after you’ve completed payment in instalments. Think of it as a deposit for a home. You pay 10% - 20% of the asset’s value upfront plus VAT. The rest of the finance is spread out over a defined period. You do not require any collateral to secure a hire purchase loan. When you’ve completed your payment plan the asset belongs to you. Equipment LeasingYou access funds to lease assets but do not own them at the end of the agreement. The leasing agreement involves the lender buying assets and leasing them to you for a fixed monthly sum. You have access to the assets without using up your capital or visibly borrowing money.Asset RefinanceDepending on the context, asset refinancing could refer to combining asset finance with another finance. It also involves using a business asset as security for a loan or to refinance business debt.Capital LeaseAlso known as a finance lease, it’s similar to equipment lease and hire purchase. A capital lease is a long-term lease where you use the asset for its lifespan. Technically, you don’t own the asset but pay the full amount over time.A deposit is not required. However, you’ll be tied in for a predetermined time frame. Monthly payments enable you to avoid the high cost of a one-off payment to purchase the asset as a whole.