What are the repayment terms and options available with asset finance?

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What are the repayment terms and options available with asset finance?

Repayment terms and options for asset finance can vary depending on the lender, the type of asset being financed, and the specific financing arrangement. Here are some standard repayment terms and options associated with asset finance:

  • Term length
    Asset finance typically involves a fixed term, the agreed-upon period over which the financing will be repaid. Term lengths can vary widely depending on the lender, the type of asset, and the financing arrangement. Common term lengths for asset finance can range from 1 to 5 years, although longer terms may be available for certain types of assets or financing arrangements.
  • Repayment frequency
    Repayment frequency refers to how often you make payments towards the asset finance facility. Standard repayment frequencies include monthly, quarterly, or semi-annually. The repayment frequency may depend on the lender’s policies and financing arrangement.
  • Repayment options
    Asset finance may offer different repayment options, depending on the lender and the financed asset type.
    Standard repayment options include:

    1. Equal instalments: This involves making equal payments over the term of the financing, which includes both the principal amount and the interest.
    2. Balloon payment: A balloon payment is a larger payment due at the end of the term, which allows for lower regular payments throughout the term. This option may be suitable for businesses that expect a significant cash flow inflow or asset sale at the end of the term to cover the balloon payment.
    3. Seasonal payments: For businesses with seasonal cash flow fluctuations, seasonal payments may be an option, where higher payments are made during peak seasons and lower payments are made during off-peak seasons.
  • Early repayment options
    Some asset finance agreements may allow for early repayment of the financing before the end of the term. If available, early repayment options may be subject to additional fees or penalties.

Discussing and understanding the repayment terms and options with your lender is vital to ensure they align with your business’s cash flow and financial needs. Carefully reviewing and understanding the repayment terms and options will help you make informed decisions about the suitability of asset finance for your business.

How can Sterling Commercial Finance Help?

At Sterling Commercial Finance, we’ve been helping businesses access funding for over 20 years. Contact the team today to see how we can help your business.

Discuss your financial needs with a member of our team 0115 9849800 or email info@sterlingcommmercialfinance.co.uk
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