However, the Australian Bureau of Statistics found that although many businesses are keen on adopting and utilising innovative technologies, there are still several obstacles standing in the way of digitisation. One of these hurdles is the high cost of implementing ICT solutions.
Digital innovation is no longer an option but a necessity for IT-reliant businesses. So, in one way or another, you'll inevitably have to up your digital game or risk falling behind the curve. If directing cash flow to fund IT investments is proving challenging, asset financing might be just the right solution for you.
What is asset financing?
Asset financing is a funding solution for businesses looking to make purchases but lack enough liquid capital to do so. There are generally two ways you can use asset financing or rather two types of asset financing solutions:
1. Access liquid capital
You can leverage asset financing to give you greater freedom with your business capital. This is similar to taking out a typical business loan, except that most financiers will also consider inventory, account receivables and other intangible resources as valid assets. But this type of financing is not for everyone. It only works for creditworthy companies with high-value assets or vast investment portfolios.
2. Secure the use of an asset
In this scenario, asset financing enables your business to secure access to machinery, equipment or software without paying a sizable lump sum upfront. You can take out this type of financing via a vendor, manufacturer or third-party financier. The lender will purchase all the necessary assets on your behalf and let you keep and use them within a set period for a small monthly or annual fee.
The repayment terms and final ownership of the assets vary between financiers. Depending on the financing agreement, you may have to pay the financier in full or over a stipulated period (with fixed or variable interest included). Also, your business may eventually own the asset, return it to the financier, continue leasing it, buy it at a low price or trade it for an upgrade at the end of the agreement.
When and why should you consider asset financing?
Asset financing is the ideal IT funding and financial management solution if you want to invest in costly IT systems without disrupting your enterprise's delicate cash flow. Is the initial high cost of hardware or software keeping you from implementing essential IT solutions? If so, asset financing is the way to go. And it appeals to both large and small organisations, regardless of sales, revenue and scale figures.
Listed below are some of the ways you stand to benefit by opting for asset financing as opposed to other purchase funding methods:
- Zero or very low upfront cost
- Low IT operating costs (the financier may be responsible for the asset’s maintenance)
- Low-risk financing with manageable repayments and a clean exit plan
- No risk of depreciation (depending on terms of the agreement)
- Tax and accounting-friendly IT purchases
- Increased flexibility in cash flow management
Get started on asset financing
There's no better way to leverage asset financing than with GRENKE. Our flexible, affordable and business-friendly asset financing solutions include the Master Lease Agreement and the Classic Lease. We fully understand the financial and technical challenges start-ups and small to mid-sized businesses go through. And our solutions fit any organisation, regardless of size or industry.
Let’s get started on bringing your IT vision to life.
