Buying new or updating equipment is an important part of any businesses’ activity.
New start up businesses may need to purchase equipment, plant, machinery and vehicles in order to trade.
And companies which are older will either be looking to fund new assets to grow and increase capacity, or replace existing equipment, in order to maintain efficiencies.
Why buy an asset for my business?
Increasing productivity: With newer or more assets, you may be able to increase productivity - eg a new machine might manufacture products more efficiently or a newer tech stack might malfunction less often
Increasing cost efficiency: Newer assets tend to have lower operational costs so materials or consumables costs may be reduced - eg a new vehicle may use fuel more efficiently than an older one or a printer may use less toner
Autonomy: owning an asset means you can control its upkeep and can make modifications when necessary (eg vs leasing), especially important for those assets which require a certain or unique specification
Tax benefits: various capital allowances are available for businesses who purchase assets which reduces the tax paid on trading profits. The Annual Investment Allowance is currently very generous. Plus, until 31/3/23, the even more generous ‘super-deduction’ could provide a higher level of tax relief for eligible assets purchased by eligible businesses. Any new fiscal incentives for the coming year will be announced by the Chancellor at the Budget on 15/3/23. Ask your accountant for more information.
There is a lot to consider when purchasing a new asset. We’ve put together some tips to help simplify things:
1. Make a plan
- Start with the business goal you want to achieve and create your plan around this so you stay focused.
- Think about what you need versus what you would like - and then prioritise. You may find that purchasing some assets can wait a year or two.
- Consider the timing. Some assets may have a long lead time and need to be ordered many months in advance of delivery, especially if they are manufactured overseas or require modifications. Also, it may be more advantageous to buy an asset in a particular year, to utilise more tax benefits for your company. So speak to your accountant to understand if that will make a difference.
2. Decide what you can outsource
- You may not need to own all the assets your business needs. For example it may be easier to outsource your IT or telephony requirements, rather than holding it all in-house.
- A cost vs benefits analysis should be carried out as part of your strategic decision making process. Considering the impact of the space you require, the personnel costs of operating the equipment and the associated energy costs should all be included.
3. Measure your business space
- It may seem obvious, but make sure you have room for your equipment once it’s delivered! Have a clear drawing with accurate measurements of the space you have in your business premises.
- For example, a long-wheelbase truck might sound great, but if you don’t have anywhere to safely store it, that will cause you problems later.
4. Buy for the best fit, not the lowest price
- As a business leader, you’re always thinking about the most efficient use of your money.
- The old expression “buy cheap, buy twice” applies. Investing in high quality equipment will mean you can work more efficiently and may end up saving you money in the long run.
- Just as with any purchases, shop around, check out reviews or testimonials from other customers, and ensure all terms are clear and in writing.
5. Secure a cost-effective Asset Finance solution
What sort of assets can be financed?
A wide range of assets can be financed, probably much more extensive than you may have expected. The obvious assets are tangible, or physical assets which you can touch, such as plant, machinery, office equipment or vehicles. These are known as Hard Assets. Elements within the construction of land, buildings and premises can also be considered for asset finance.
Soft assets can also be funded and these are likely to have a shorter lifespan, so they will have little resale value at the end of the agreement. This can include software, IT equipment, fixtures, fittings and even electronics (such as CCTV, security systems, cash tills etc.)
How can I apply for asset finance?
At Capitalise, we work with a range of specialist asset finance lenders. You can see what you’re eligible for in a few minutes by searching our pool of over 100 UK lenders.
Or, for more information about how we can help fund your asset purchases, get in touch with us and our team of funding specialists can help you find out what options your own business may have.