Against a challenging financial landscape, more and more high growth companies are seeking flexible and tailored solutions to meet their investment needs when it comes to upgrading facilities and equipment.
To support this investment, asset finance and bespoke funding are flexible solutions that offer businesses the opportunity to acquire and manage essential assets without compromising their cash flow or capital budgets.
In this blog, we’ll delve into what asset finance is, how it works, and explore the nuances of bespoke funding, including the benefits of finance lease agreements and equipment leasing.
What is asset finance?
Asset finance is an agreement that allows businesses to acquire a wide range of assets. From multi million pound modular facilities and full equipment suites to single pieces of equipment, an asset finance agreement removed the need for a substantial upfront payment. Our team at SAF is vastly experienced in working with suppliers in healthcare, modular, life sciences, research and innovation and green technology industries and have devised a range of branded and tailored asset finance solutions.
With our support and expertise, we introduce solutions that allow businesses to spread the cost of these assets over a period of time via a lease agreement, helping end users to preserve capital budgets and manage cash flow effectively – whilst still allowing essential investments and upgrades into equipment and infrastructure.
In the UK, asset finance is governed by a number of stringent accounting standards, including SSAP21, IFRS16 and FRS102. SAF is well-versed in these standards and has extensive knowledge of public sector auditors to ensure solutions are compliant and adhere to the relevant accounting requirements and frameworks.
How does asset finance work?
An asset finance agreement provides businesses with the necessary capital to acquire assets without the need for upfront capital. Customers can pay a regular, pre-agreed amount (typically monthly) to use the asset across a set period, helping them preserve cash flow l and keep balance sheets more manageable through utilising revenue budgets to support new investments.
In certain circumstances, organisations may even ultimately pay for the asset using the revenue or savings gained through utilising the asset.
Some of the key benefits include:
- Negotiating power: if a customer doesn’t have the upfront capital available, offering a bespoke finance agreement will help close more sales cycles
- Increased flexibility: For modular suppliers our range of finance solutions offers the capability to add additional costs for soft and hard facilities management into the repayment cost via a bespoke Managed Service Agreement. Alternatively, end-users can benefit from a usage-based solution, only paying for the asset when it is used.
- Enhanced cash flow management for end users: capital can be preserved to pay for other upgrades or essential infrastructure works – or investment in other business areas
- Compliant solutions: with support from the team at SAF, we work to understand the various accounting treatments and other financial considerations to ensure any agreement is compliant. This includes IFRS 16.
SAF works with the supplier to understand more about their service offering/product range, this includes understanding the challenges the end-users’ experience when it comes to investing in/upgrading equipment.
Once we understand the pain points faced by our suppliers’ customer base, we set to work delving into their financial profiles, covering off accounting treatments. From here, we’ll advise whether a standard Hire, Managed Service or Pay Per Use agreement fits best, and work with the supplier to implement this on behalf of the end user.
How Does Equipment Leasing Work?
Equipment leasing is a specific type of asset finance that is well suited to a flexible finance solution, allowing organisations to acquire and use machinery and equipment, without having to own or purchase the asset outright. This method allows businesses to obtain the latest technology and enhance operations and scalability, without the significant upfront financial burden.
At SAF, we have devised the finance agreements for more than 25 equipment supplier partners via branded solutions.
We work with suppliers by:
- Understanding the requirements of end-users: we work alongside suppliers to understand their customers, taking into account budget constraints, financial drivers and typical asset values
- Lease Agreement: From here, we’ll work with the supplier to identify the best solution for their customers and devise a tailored agreement. This outlines the lease term, payment structure, and any maintenance or service provisions.
- Usage: If a Pay Per Use solution has been requested or recommended, SAF also works with the supplier and customer to understand the average usage of the asset
- Payments: From here, a regular payment profile is set up, which are structured to be manageable and reflect the equipment’s usage and value.
Bespoke Funding: Tailoring Solutions to Your Needs
Our branded, bespoke funding agreements go beyond traditional asset finance by offering tailored financial solutions to address unique business requirements – no two finance agreements are the same and this can be reflected in the solution put forward to the customer, enhancing trust and building long-lasting relationships.
At SAF, our experienced team of financial experts design a funding solution that aligns perfectly with the business’s goals, operational needs, and financial situation, including accounting treatments and other requirements, to create a truly bespoke solution to benefit all parties.
Asset finance and bespoke funding options are invaluable for suppliers aiming engage more customers through offering a more agile and responsive procurement route; particularly for industries with increased financial pressure when it comes to securing capital budget.
By understanding how asset finance works, including concepts like finance lease agreements and equipment leasing, suppliers can put forward alternative solutions that allow their customers to make informed decisions that align with their strategic objectives.
At SAF, we’ve financed more than £850m worth of projects across the healthcare, modular construction, life sciences, research and innovation, and green tech, working closely with suppliers to introduce new and improved solutions for their customers.