Purchasing a major asset
If a small business is looking to acquire another business or invest in a large asset, such as specialist plant or machinery, an injection of capital may be required.
Whether it’s for scalability, efficiency, or strategic expansion, the right assets can accelerate a start-up’s growth, making external funding a bridge to greater potential and success.
Funding can be used for challenges such as:
Upfront costs
Major assets can be significant investments and may be beyond the immediate financial capacity of a new business.
Scalability
Investing in a major asset can enable your start-up to scale operations, produce at higher capacities, or deliver services more efficiently.
ROI
Although the initial cost of acquiring a significant asset is high, it can yield returns over an extended period.
Efficiency
Some assets, like advanced machinery or technology, can optimise operations, reduce labour, and increase production rates.
Bridging loans
A loan that can be used to “bridge” a gap in a business’s finances and provide quick access to capital.
Due to their short-term loan period and higher rates of interest compared to other forms of finance, bridging loans are typically used for major business purchases.
Find out more about bridging loans.
Commercial fleet finance
This is used to fund the purchase of a fleet of vehicles.
The main options are:
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Contract hire:
Provides access to vehicles in return for fixed rental payments over a set period.
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Finance lease:
The total cost is paid in monthly instalments or via lower monthly instalments with a final payment at the end of the lease based on the vehicle’s expected resale value.
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Hire purchase:
A vehicle is purchased by making fixed payments and interest during a specified period.
Find out more about commercial fleet finance.
Finance Options Include:
Asset finance
This allows a business to acquire assets without putting additional pressure on cashflow or needing to raise a significant amount of working capital.
Products vary, but it generally involves leasing an asset and making monthly payments.
Find out more about asset finance.
Mezzanine finance
A hybrid form of funding that blends debt and equity finance.
A business agrees to repay the loan with interest, but the debt could convert into shares in the company if it is unable to meet the repayments.
Find out more about mezzanine finance.
Commercial mortgages
A loan that involves paying a deposit followed by monthly repayments with variable or fixed interest rates.
Find out more about commercial mortgages.
Secured loans
For this type of loan, collateral, such as property, vehicles and machinery, is needed as security against the amount borrowed.
Find out more about secured loans.
Leasing and hire purchase
Leasing allows a business to use an asset in exchange for rental payments, while hire purchase involves an asset being purchased outright by making fixed payments and interest.
Success rates are high for applications, but if you default on payments, the lender may recover the asset, which could harm your credit rating.
Find out more about leasing and hire purchase.
Grants
This is funding that doesn’t have to be paid back. Some grants provide funding for businesses to purchase equipment.
See the ‘scaling and growing a business’ section for more details.
British Business Bank plc is a development bank wholly owned by HM Government. British Business Bank plc and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at british-business-bank.co.uk.
Whilst we make reasonable efforts to keep the information in this guide up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
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Worth knowing
Purchasing a fleet of vehicles could help a business grow, but companies may lack the funding to do it. That’s where fleet financing comes in.
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