Rethinking how businesses fund assets.
Businesses still need to invest. Vehicles need replacing, machinery needs upgrading and growth often creates the need for additional equipment.
We caught up with Dan Bullock, Asset Finance Specialist at Trusted Business Partner (TBP), to explore why the way a business funds an investment is just as important as the investment itself.
Are businesses still investing despite wider economic pressures?
Absolutely. Businesses cannot always put investment on hold because there is uncertainty. If machinery is needed to increase capacity or vehicles need replacing, those decisions still have to be made. What has changed is the conversation around funding them. Businesses are increasingly conscious of protecting cash and working capital, how they pay for an asset can be just as important as the asset itself.
If a business has the cash available, why consider finance?
Paying cash isn’t wrong. Sometimes it will absolutely be the right decision.
The important thing is comparing the options. If a business spends a significant amount from its reserves on equipment today, what does that leave available for stock, wages, recruitment, future opportunities or unexpected costs? Asset finance can spread the cost while allowing the asset to be used within the business.
What else could cash flow be used for or where else could it be invested?
Is asset finance mainly about new vehicles and machinery?
Not at all. Finance can support a wide range of assets, from vehicles and machinery to specialist equipment, technology and plant.
Businesses may also be able to refinance assets they already own. Subject to the asset and wider circumstances, this can release capital tied up in equipment while the business continues using it day to day. Useful when a business has value sitting within its asset base but wants to create additional working capital elsewhere.
What mistakes do businesses commonly make?
Convenience can drive the decision. The supplier offers finance and it feels like the natural next step. That may well be suitable, but it’s still worth comparing the wider structure. Monthly repayments or headline rates are only part of the picture. Deposit, term, total cost, flexibility and what happens at the end of the agreement all matter.
Finance needs to work for the wider business, not just fund the asset.
So asset finance isn’t really just about the asset?
Exactly. I want to understand what the business is trying to achieve. Is it replacing equipment? Increasing capacity? Supporting a new contract? Preserving cash? Expanding a fleet?
Once you understand the reason behind the investment, you can look at how the funding fits with the wider business.
When should businesses start that conversation?
Ideally, before committing to the purchase. The earlier we understand the plan, the more opportunity there is to explore different structures and lenders rather than trying to fit finance around a decision that’s already been made.
And speaking to a broker doesn’t mean deciding to borrow. Paying cash may still make sense. The value is in comparing the options first.
What’s one question every business should ask before purchasing its next major asset?
“If we use our cash for this today, what might we need that cash for tomorrow?”
Cash and finance both have their place. What matters is understanding the impact of each and choosing what makes sense for the business.
Dan Bullock, Asset Finance Specialist
If you or a client is planning to invest in equipment, vehicles or machinery – or release capital from assets already owned – let’s explore what works best for the business, not just the asset.
M: 07887 827827
E: dan@tbp.co.uk
W: www.tbp.co.uk