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Most companies inherently understand that buying is better than leasing. They agree that owning the equipment is better because it means they have an asset in their canon- as opposed to a liability. Leasing the item means they have to pay an external entity without building asset equity. The most immediate benefit is that they do not have to pay for repairs. Is that really enough? The answer is no. Asset financing helps make buying an even superior proposition because it opens up cash flow in new and exciting ways.

The Exception to the Buying is Better Rule

There is an exception to this largely concrete rule. If a company wants to experiment with an idea for a short period of time, they should lease first. An example would be a bathroom remodeling company looking to expand into home construction. It is a huge leap. Only in these huge and risky leaps should leasing be considered.

For Everyone Else: The Basic Buying Preference

When a company buys an asset, they can begin building equity on that asset. The business loans rates goes into the company´┐Żs valuation in a resale, and there are tax benefits to purchasing. The one problem with the strategy is that it ties up finances. A new construction truck costs $120,000. They bought the item, but they are now out $120,000, which is money not going into marketing, promotions, development, etc. It will be even more if the company gets a part loan on the item. What is the answer to fixing this one major problem in financing?

How Asset Finance Solves the Problem

The asset finance resources can provide a loan tied to the asset. This can benefit the company in an assortment of ways. For one, the loan is just for the asset. The opportunity cost is increased because the loan is for the addition of the asset. It is affected by what the asset can do (i.e. a construction truck is paramount for a construction company).

It is true that asset leasing will still add interest, and that is a largely unavoidable problem. But, the asset finance lease is intrinsic to the asset directly. It means that the rates will be determined by the quality of the asset, and how it helps the firm. The loan will also be adjusted based on business performance. Visit the official website of Portman Asset Finance to learn how this type of fiancning varies from the traditional banking approach.

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