When investing in physical assets for your business, the first question after deciding ‘what’ you are going to buy or invest in, is how are you going to ‘pay’ for it. Asset Finance or Equipment Finance as it is also known as the preferred finance option used by business owners. Where you are purchasing an asset (CAPEX) that will last several years, it often doesn’t make sense to use cash flow that should be used for OPEX and kept available to grow your business.
Financing a physical asset allows you to align the payments over the useful life of the asset. Finance facilities have a wide range of options designed to suit the specific needs of your business. There are three main categories of Asset Finance products. None of these product types is better than the others. Instead, each has different characteristics that provide various benefits and treatments of tax. We recommend that you discuss the best product type with your broker and accountant before completing a purchase.
Within a business, there are two broad categories of business expense: Capital Expenditure (CAPEX) and Operational Expenditure (Opex). Capex relates any payment used to invest in physical assets that include property, buildings, industrial plant, equipment and technology. OPEX refers to the day to day operational costs required to keep that business trading such as wages, rent or electricity.