Barclays Asset Finance with Propel
Barclays continues to show its commitment to support the diverse needs of SME’s and has partnered with Propel, a specialist asset finance provider, to offer comprehensive asset finance services designed for UK small and medium-sized businesses (SMEs). This collaboration allows Barclays to extend a flexible and accessible funding solution for essential equipment, vehicles, and machinery that SMEs need to grow.
Through this partnership, businesses can avoid large upfront investments, spreading costs over time with solutions like Hire Purchase. It aims to improve cash flow management and free up working capital for other business priorities. The partnership with Propel offers quick decisions and fast access to funds, often within a short timeframe for a range of asset types. This includes financing for both new and used assets and options for green assets like electric vehicles. The service is available to various business structures across the UK, from sole traders to limited companies.
Understanding UK Business Asset Finance
For small to medium-sized businesses (SMEs) and larger corporations alike, acquiring essential equipment, vehicles, or technology can represent a significant upfront cost. Asset finance offers a practical alternative to outright purchase or traditional loans, allowing businesses to access the assets they need without tying up large amounts of capital. It’s a broad term encompassing several commercial funding options, each designed to meet different business needs.
What is Asset Finance?
At its core, asset finance allows businesses to obtain or use an asset by spreading the cost over time, rather than making a substantial upfront payment. The asset itself often serves as security for the funding, which can reduce the risk for lenders and potentially lead to more favourable terms compared to unsecured borrowing. . This can be particularly beneficial for SMEs looking to manage cash flow effectively and invest in growth without depleting their working capital.
Types of Asset Finance
Asset finance includes various products, each with distinct features and some examples are:
Hire Purchase
Hire Purchase (HP) is a popular option for businesses that intend to own the asset at the end of the agreement. With HP, you essentially “hire” the asset by making regular monthly payments over an agreed period. A deposit is typically paid upfront, and once all payments, including a small “option to purchase” fee, are made, ownership of the asset transfers to your business. This method is well-suited for assets with a long useful life, such as vehicles, machinery, or equipment, where eventual ownership is desired. Businesses can budget effectively with fixed monthly payments, making it easier to manage cash flow.
Leasing
Leasing involves renting an asset for a fixed period rather than buying it outright. This can be particularly beneficial for assets that depreciate quickly or for businesses that prefer to regularly upgrade their equipment. There are generally two main types of leases:
- Finance Lease: With a finance lease, the finance provider purchases the asset and leases it to your business. You make regular payments covering the asset’s cost and interest. At the end of the lease term, you might have options to continue renting, return the asset, or sell it on behalf of the finance provider. Responsibilities for insurance and maintenance typically rest with your business.
- Operating Lease: An operating lease is more akin to a long-term rental, often for shorter periods. It’s common for assets where you want to use the equipment but not own it and it can include options to upgrade to newer models. With an operating lease, the finance provider often retains responsibility for maintaining the asset throughout the term.
Leasing can offer improved cash flow as it spreads costs and often allows for VAT to be applied to each rental rather than being due in full upfront.
Asset Refinancing
Asset refinancing, sometimes referred to as ‘sale and leaseback’, allows businesses to unlock capital tied up in assets they already own. Your business sells an existing asset to a finance provider and then leases it back, continuing to use it for operations while receiving a cash injection. This can be a strategic way to raise funds for other business needs, such as working capital, expansion, or debt consolidation, without losing access to essential equipment. Even if an asset isn’t fully owned (for example, if it’s still under a hire purchase agreement), it might still be possible to refinance the equity built up in it.
Invoice Finance (Asset Based Lending)
Invoice finance, a key component of asset-based lending (ABL), focuses on unlocking the value of a business’s outstanding invoices (also known as accounts receivable). Rather than waiting for customers to pay, a business can receive an immediate cash advance against the value of its invoices. This provides a steady flow of working capital, directly linked to sales performance. ABL facilities can also extend to providing finance against other assets like inventory and plant & machinery, offering a more comprehensive funding solution.
Asset Finance vs. Traditional Business Loans
While traditional business loans provide a lump sum that can be used for various purposes, asset finance is specifically tailored for acquiring or leveraging physical assets. A key difference is that asset finance is secured against the asset itself, which often means lower interest rates and potentially more accessible eligibility compared to unsecured loans. For businesses making significant capital investments, asset finance can be a more efficient and tax-friendly option, allowing for capital allowances and VAT recovery on qualifying assets or lease payments.
For SMEs, this flexibility means they can invest in the tools they need to grow without the burden of a large upfront payment, preserving their cash for day-to-day operations and other strategic investments. For larger businesses, asset finance can be integral to managing extensive fleets, machinery, or technological infrastructure, offering structured financial solutions for significant capital expenditure.
Asset Finance FAQs
What types of assets can be financed?
Asset finance can cover a wide range of tangible, moveable assets required for business operations. This commonly includes vehicles (from vans to lorries), machinery (such as manufacturing equipment or construction), IT hardware, specialist equipment and future income.
Is asset finance only for new equipment?
No, asset finance isn’t limited to new equipment. Many providers offer options for financing used assets, which can be a cost-effective solution for businesses looking to acquire or keep equipment without the full expense of a brand-new item. Asset refinancing, for example, is specifically designed to unlock value from assets your business already owns.
How does asset finance impact my business’s cash flow?
One of the primary benefits of asset finance is its positive impact on cash flow. By spreading the cost of an asset over an agreed period through regular payments, businesses can avoid large upfront outlays or it provides an injection of cash from assets you already own. This allows capital to remain in the business for other operational needs, growth opportunities, or to maintain healthy working capital levels.
Can asset finance be used by new or smaller businesses?
Yes, asset finance can be accessible to new or smaller businesses. While lenders will assess creditworthiness and the ability to make repayments, the fact that the asset itself often serves as security can make it a more viable option than traditional unsecured loans for businesses that may not have an extensive trading history or substantial collateral.
What happens at the end of an asset finance agreement?
The outcome at the end of an asset finance agreement depends on the specific product you have opted for. Each type comes with various options to retain or gain ownership or conversely, to hand back the asset after a period of use. It’s really important to understand these terms from the outset of the agreement as each one differs in the responsibilities you have to meet in the contracted agreement.