Andy Sagar, Managing Director for Construction and Recycling at Close Brothers Asset Finance, covers the key questions surrounding asset finance for the Waste and Recycling industry.
What are the business benefits of asset finance?
“One of the most obvious benefits of using asset finance is that it allows a business to purchase new machinery or vehicles with a minimum capital outlay. New machinery often means greater efficiency or greater output, thus helping a business expand or meet increased demand for its services without putting huge pressure on cash flow.
Another key benefit is that asset finance is often much more flexible than a standard bank loan or overdraft. The repayments are spread over an agreed term, and can be structured to correlate with the income generated by the asset – so if a business is seasonal, for example, that can be taken into account when agreeing the repayment terms.
Asset finance also allows certain tax benefits – capital allowances are available on a variety of equipment meaning businesses can offset some of the payments made.”
What should waste companies consider when choosing an asset finance provider?
“In our view, one of the most important things waste companies need to look at is the provider’s experience in the waste management industry - your asset finance provider must have a good working knowledge of the typical assets you’re using.
At Close Brothers Asset Finance we use our understanding of the industry to create bespoke finance packages that are relevant to the asset and business in question – our experience also allows us to underwrite deals that banks wouldn’t look at.
Our advice is to spend time researching and understanding your options - companies should look to asset finance providers that they can trust and who they can seek support and advice from, as well as appropriate asset finance options throughout the lifecycle of their business.”
Can you explain the different types of asset finance/flexible leasing options?
“We offer three core products; Hire Purchase, Leasing and Sale and HP Back, each are explained in more detail below.
Hire purchase gives companies eventual ownership of an asset at the end of the repayment term allowing them to spread the cost of their equipment, plant or machinery through manageable instalments, ensuring healthy cash flow is maintained.
Leasing allows a business to spread the VAT payment over the term of the agreement with rentals attracting VAT as they fall due. After the primary lease period firms either arrange for the sale of the asset receiving a refund against rentals paid for an agreed percentage of the sales proceeds, or enter into a new term paying secondary period annual rentals.
Sale and HP Back, or asset refinance, releases the value in existing unencumbered assets. In essence the lender buys the asset from the business at a percentage of its value and re-finances it back over an agreed period. So the company still uses the asset only now it is able to inject part of its value as cash directly into its business.”
Why would asset finance be a viable option for large business purchases (such as large machinery/equipment)?
“In a nutshell, asset finance is an extremely sustainable form of funding for large business purchases.
Few businesses have the cash resources to buy a large asset outright, and asset finance offers a flexible and cost effective way to purchase the plant, machinery and equipment needed to help firms meet their growth aspirations.
We see it as a way of making the most of what’s already on your balance sheet – there’s often a lot of value in existing unencumbered assets that can be unlocked via asset finance to provide a cash injection. It enables the purchase of assets of all sizes, which mightn’t otherwise be possible.”
To find out more about asset finance and how we can help your business, contact our Waste and Recycling team on 01244 456 504 or complete an enquiry form.