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Articles and Insights from the GA Team and Network

Using your precious financial resources to fund your factory production equipment, is a wasted opportunity

Using your precious financial resources to fund your factory production equipment, is a wasted opportunity

By Gary Santino

After talking with many Food or drink companies, there seems to a recurring theme that runs through their plans for Scaling Up and generally growing their businesses. The major point of these challenges circle around the cash flow and available funding.

Profitable orders are available but getting to that all-important next phase in the business sometimes grinds to a halt once the overdraft and loans are maxed out. This is more frustrating when the consumer loves your product and you just can’t seem to produce anywhere near enough of them to satiate their appetite.

The fact that over 40% of SMEs haven’t even heard of Asset Finance let alone how it really works, illustrates why the value in the business is being truly leveraged correctly, especially for any company who manufactures wholly or part of their product.

If this is a fact of your own everyday order fulfilment, then below is a brief summary of how Asset Finance can help you.

What is asset finance?
Asset Finance is an alternative form of funding used by businesses to obtain the equipment they need to grow.
Common examples of asset finance products are:

  • Hire Purchase (HP) allows the customer to buy the equipment on credit. The finance company purchases the asset on behalf of the customer and owns the asset until the final instalment is paid, at which point the customer is given the option to buy it.
  • Refinancing (Capital Release): The finance company purchases the asset and finances it back to you. Repayments are calculated in line with the income stream that will be generated by the asset; at the end of the refinance term, you own the asset
  • Finance lease: The full value of the equipment is repaid to the finance company, plus interest, over the lease period. At the end of the term, the company can choose to:
  1. continue to use the asset by entering a secondary rental period
  2. sell the asset and keep a portion of the income from the sale
  3. return it

Operating lease: Like a Finance Lease, an Operating Lease allows you to rent the asset from us while you need it. The key difference between the two is that an Operating Lease is only for part of the asset’s useful life. This means you pay a reduced rental because the cost is based on the difference between the asset’s original purchase price and its residual value at the end of the agreement.

If you want to see how we are currently helping other food and drink companies grow, whether this is assisting in buying new kit, building extra units to operate from or just working capital, then send me an email.

If you are looking for that extra production equipment or working capital and want to know how we help food and drink companies then drop me a line. garysantino@mentoringbritain.com

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