What Is Asset Finance?
Asset finance lets businesses acquire equipment, vehicles, or machinery without paying the full cost upfront. Instead, you spread the cost over time with fixed monthly payments. The asset itself often serves as collateral, making approval easier than unsecured loans.
Types of Asset Finance
Common types include hire purchase (you own the asset at the end), finance lease (return or buy at residual value), operating lease (rent the asset), and chattel mortgage (asset-secured loan). Each has different tax implications and ownership structures.
How Residual Value Works
A residual or balloon payment reduces monthly payments by deferring a portion of the cost to the end of the term. For example, setting 10% residual on a $50,000 asset means a $5,000 lump sum is due at the end, but your monthly payments are lower throughout the term.