IT Equipment – Asset Finance Solutions by Industry

Types of Finance

Are you an IT business looking to expand your operations but facing financial constraints? We have helped to support and fund almost over 100 asset finance requirements for the IT & Technology business sector this year. Asset finance options could offer a strategic solution to help your business overcome these challenges. By the use of asset finance and asset-based lending, your business could acquire the necessary equipment and technology without incurring significant upfront costs.

Whether you need to upgrade your servers, invest in cutting-edge software, or expand your data centre, asset finance provides the flexibility and financial support to achieve your goals. We specialise in tailoring asset finance solutions for all sectors of business. Our expert team understands the unique financial needs of businesses like yours and can help you find the right financing option.

Need help understanding whether asset finance is right for your IT business? ▶ ▶ ▶
We’ve got you covered. Continue reading our article to learn the basics, benefits, and examples of asset finance for the IT & Tech industry. Or, instead reach out to our team for more personalised business finance advice.

4 Benefits of Acquiring New Technology & IT Equipment with Asset Finance

1) Upgrades to IT Infrastructure ▶ ▶ ▶
Modernise hardware with the capability to invest in the latest servers, workstations, and networking equipment which overall improves company performance, reliability and security. Implement new software to streamline processes, increase efficiency, and stay compliant.

2) Support your Business Growth & Expansion ▶ ▶ ▶
Scale your operations, expand into new markets, or launch new products/services. Invest in technology that enables better communication, collaboration and customer support, to facilitate your expanding business.

3) Improved Data Security & Compliance ▶ ▶ ▶
Protect sensitive information by implementing robust security measures, equipment, or software to safeguard your data from cyber threats. Ensure your business stays compliant and up-to-date with industry regulation and data privacy requirements.

4) Get Access to the Latest Technology ▶ ▶ ▶
Stay competitive and gain access to the latest IT innovations to maintain a competitive edge in the constantly evolving industry. Drive innovation in your business and leverage new technology that you need to provide customers with state-of-the-art products/services.

Asset-based Lending & Refinancing for IT

Asset-based lending and refinancing are additional asset financing options that can prove beneficial to IT businesses that are considering to acquire or upgrade equipment.

▶▶▶ Asset-based Lending

This type of finance involves using your business’s assets as collateral to secure a loan. This can be particularly beneficial for IT businesses with valuable equipment such as servers, networking equipment, or software licenses.

• ABL can provide a rapid source of financing, often within days.
• Flexibility to meet your specific needs, with options for revolving credit lines or term loans.
• In some cases, lower interest rates compared to traditional business loans.

▶▶▶ Asset Refinance

Refinancing can be both a way to release equity from your assets, or help to pay-off existing loans with more favourable terms. This can be a useful strategy for IT businesses that wish to increase capital or reduce their existing agreement monthly payments.

Overall, asset-based lending and refinancing can support your IT / Tech business by providing access to additional financing options, supporting growth and investment in the technology you need.

Asset Finance Options for the IT & Technology Industry

Hire Purchase (HP)

With Hire Purchase (HP), you pay a deposit and VAT upfront, then make regular payments to acquire ownership of the asset at the end of the agreed-upon term. A ‘balloon’ payment may be an option in order to reduce monthly repayment values.

Example of HP

An IT and Tech business, specialising in cloud computing solutions, is experiencing rapid growth and increased demand for its services. To meet the growing workload and ensure optimal performance, the business needs to upgrade its server infrastructure.

The current server, although functional, is becoming outdated and struggling to handle the increased demand. A new, high-performance server with advanced features and capabilities is essential to maintain the business’s reputation for reliability and scalability.

Hire Purchase Agreement:

Deposit – The business pays a deposit of 10% of the server’s total £50,000 cost, which amounts to £5,000.

VAT – The business also pays VAT, which is 20% of the server’s cost, totalling £10,000.

Regular Payments – Based on a strong credit rating, the remaining balance of £35,000 is spread over a 36-month agreement, with monthly payments of £1,151.

Ownership – At the end of the 36-month term, the business will own the server outright.

Key Benefits of Hire Purchase

Preserves Cashflow ⏵ By spreading the cost of the server over time, the business can maintain its working capital for other essential expenses.

Upgrades to Latest Technology ⏵ The business can acquire a state-of-the-art server to improve efficiency and support future growth.

Tax Benefits ⏵ Depending on local tax laws, the business may be eligible for tax deductions or allowances related to the purchase of the server.

Predictable Payments ⏵ The fixed monthly payments make it easier for the business to budget for IT expenses.

If you are still unsure if Hire Purchase is right for your business, our experts can find the right funding for you. Find out how Portman can help by making an enquiry with us. Alternatively, learn more from our Hire Purchase finance page.

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Finance Lease

Looking to modernise your IT infrastructure without straining your budget? Finance leasing offers a flexible and tax-efficient solution. By spreading the whole cost over time, including the VAT and with less deposit, businesses can acquire state-of-the-art technology without the upfront capital investment.

Not sure what a Finance Lease is? Check out our article on 6 Types of Asset Finance – Finding the Right Solution.

Finance Lease Example

An IT and Tech business, specialising in software development wins a new contract and needs to equip its developers with powerful workstations to handle new complex coding projects and large datasets. The business will be paid monthly by the client and so hasn’t yet been paid for its work, needing to avoid the one-off upfront cost of purchasing 12 new workstations.

Business Finance Lease:

Monthly Payments – The business takes a 36m lease agreement to pay for the workstations with a deposit of 1m payment, spreading the VAT, interest and cost across the term. The business is established and has strong credit so is offered monthly repayments of £394.84.

Ownership – At the end of the lease term, the business has the option to give the equipment back, continue leasing, or explore ownership through through a transfer of title, giving them flexibility.

Key Benefits of a Finance Lease

Avoids Upfront Costs ⏵ The business avoids the large upfront expense of purchasing the workstations.

Flexibility ⏵ The lease agreement allows the business to upgrade or replace the workstations as needed, ensuring that its developers have access to the latest technology.

Tax Benefits ⏵ Lease payments can often be deducted as business expenses and so may reduce your corporation tax liability.

Predictable Payments ⏵ The fixed monthly payments make it easier for the business to budget for IT expenses as it knows how much it will earn from the monthly contract.

Discover how we can assist you with your equipment financing needs. Visit our Lease Financing page to learn more or apply directly. Or get a finance quote online and get started.

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Contract Hire / Operating Lease (OL)

Contract hire is essentially another term for an operating lease, specifically within the context of vehicles. However, its application can be extended to other assets like large-scale technology equipment.

Operating lease offers flexibility for businesses that need to regularly update their equipment. It often includes maintenance and repair cost options in the rental payments.

Contract Hire Example

An Technology business, with a team of field engineers who frequently travel to client sites, needs to provide them with reliable and modern company cars. The business wants to avoid the upfront costs of purchasing multiple vehicles and wants to manage its vehicle fleet efficiently.

Contract Hire Agreement:

Vehicle Type – 5 * Mid-sized, fuel-efficient company cars (e.g. Toyota Corolla Hybrid) @£29,598 each

Contract Term – 36 months, mileage of 20,000 per year with an expected residual value of £14,000 per vehicle

Monthly Payments – Estimated monthly repayment: £2467.74

Benefits of Contract Hire in this Scenario

Avoids Upfront Costs ⏵ The business avoids the upfront expense of purchasing five cars.

Fleet Management ⏵ The leasing company handles vehicle maintenance, repairs, and administration, reducing the business’s administrative burden.

Tax Benefits ⏵ Leasing payments may be deductible as business expenses, potentially saving the business money on corporation tax.

Predictable Payments ⏵ The fixed monthly payments make it easier for the business to budget for vehicle expenses and to repay as its engineering team generate revenue.

Flexibility ⏵ Contract hire agreements can be tailored to meet the specific needs of the business, including vehicle type, mileage, and contract term.

By choosing contract hire, this Tech business can provide its employees with reliable company cars without the upfront costs or administrative burden associated with vehicle ownership.

Find out how Portman can help, learn more or apply for an Operating lease / Contract hire through our finance page. Alternatively, request a quote and make a finance enquiry online.

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Asset / Equipment Refinance for IT & Tech

Refinance is the process of restructuring an existing loan or lease agreement, typically to obtain more favourable terms or reduce monthly payments. Or, releasing equity from assets you already own by taking out a loan secured on them. Refinancing can be a valuable tool for businesses looking to optimise their financing arrangements.

Asset/Equipment Refinance Example

An IT solutions business, specialising in software development and cloud services, has experienced a decline in revenue due to increased competition and needs funding whilst improving its services. As a result, the business is struggling to meet its current obligations.

Refinancing Options:

• Asset-Based Lending – The business can use the server infrastructure as collateral to secure a new loan from a lender.
• Sale-Leaseback – The business can sell the server infrastructure to a third party and then lease it back. This allows the business to release equity from the asset while continuing to use the equipment.

Refinancing the Existing Loan:

Existing Loan – Principal balance of £500k, annual flat interest rate of 11%, remaining term of 36 months.

New Loan – Business refinances the loan at an annual flat interest rate of 8%, and a new term of 48 months. Reducing monthly repayments by over £4k per month. This reduces the cashflow burden whilst allowing the agency to develop its new software.

Benefits of Asset/Equipment Refinance

Lower Interest Rates ⏵ The business may be able to secure a lower interest rate on the new loan, reducing its monthly payments.

Extended Term ⏵ A longer loan term can spread out the payments, making them more manageable.

Improved Financial Flexibility ⏵ Refinancing can provide the business with more flexibility in its financial management.

Considerations for Refinancing

Transaction Costs – Both asset-based lending and sale-leaseback involve transaction costs.

Market Conditions – Interest rates and lending conditions can fluctuate, impacting the terms of the new loan.

Business Performance – The business’s financial health and future prospects will influence the lender’s decision to approve the refinancing.

Refinancing involves restructuring a business’s debt by combining multiple loans into one or securing a better interest rate. This often results in lower monthly repayments due to a reduced interest rate or extended repayment term. While refinancing can be beneficial, it’s essential to consider all options. If your primary goal is debt consolidation, seeking professional financial advice is recommended.

We can incorporate refinancing into a new finance agreement, particularly when part-exchanging a vehicle with outstanding finance.

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A Summary of Options

Asset-based lending for IT & Technology, at a glance…

Asset Finance Options	How it works	Why use it	Suitable for
Hire Purchase [HP Options]	Ownership of the asset passes to the business at the end of the agreement after making final payment (often called an ‘option to purchase fee’).	Starting up or experiencing growth – Acquire equipment without significant upfront costs, improving cashflow. Claim capital allowances – Write off the cost of your capital investment in year 1, reducing your taxable profit and reducing the corporation tax bill.	Software development companies – Acquiring servers, workstations, and development tools. IT service providers – Investing in networking equipment, data storage, and client devices. E-commerce businesses – Funding the purchase of web servers, online stores, and payment processing systems. Cybersecurity firms – Investing in advanced security hardware and software.
Finance Lease [Finance Lease Options]	Similar to hire purchase, but ownership remains with the finance company. The business can usually claim tax relief on the lease payments.	Ownership – With a finance lease, the asset remains the property of the lessor. At the end of the lease term, you have the option to purchase, give back or continue leasing the item. Tax treatment – Finance lease payments are typically deducted from monthly taxable profits as operating expenses.	IT consulting – Providing expert advice on technology strategy, implementation, and management. Artificial intelligence (AI) development – Creating AI systems and applications. Custom software development – Tailoring software solutions to specific business needs. Internet of Things (IoT) development – Creating connected devices and systems.
Operating Lease	The business rents the asset for a fixed period. Ownership remains with the finance company.	Flexibility – They allow for easy adjustments to asset needs based on business fluctuations. Want to avoid long-term commitments – Leases can be for shorter terms, reducing the risk of asset obsolescence. Benefit from off-balance sheet financing – OL’s can help improve a company’s financial ratios by keeping assets and liabilities off the balance sheet.	IT Development companies – Leasing specialised software licenses for a specific project or timeframe. IT service providers – Leasing servers or networking equipment to meet temporary demand or for a specific client project. E-commerce businesses – Leasing warehouse space or equipment during peak seasons or for specific product launches. Tech Security – Leasing advanced security hardware or software for a particular threat or compliance requirement.
Asset Refinance [Asset Refinance Options]	Replacing existing finance with new finance, often to release cash or acquire new equipment / assets.	Businesses experiencing growth – As a company expands, it may need to invest in additional IT resources. Refinancing can provide the necessary capital to purchase new equipment or software. Businesses looking to improve cash flow – Refinancing can help free up cash flow by reducing monthly payments or extending the loan term. This can be particularly beneficial for businesses that are experiencing temporary cash flow issues or want to invest in growth initiatives. Companies with valuable IT assets: If a business has IT assets that have appreciated in value, refinancing can allow them to leverage this equity to obtain additional funding.	Cybersecurity business – Refinancing can provide the capital needed to invest in advanced security technologies, expand services, or acquire new clients. Data centre companies – Refinancing can help fund the expansion of data centre capacity, upgrade existing infrastructure, or improve energy efficiency. MSP (Managed Service Provider) Business – Can be used to invest in new technologies, expand service offerings, or acquire new clients. Game software development companies – Refinancing can help fund the development of new game software products, expand existing offerings, or acquire new technologies.

If unsure, a financial advisor can help you evaluate your options and choose the best fit for your business financing requirement and always talk to your accountant if you are considering tax implications.

The most suitable financing option for your business depends on a variety of factors, including your specific needs, the type of assets you want to acquire, the desired timeline, and your business’s creditworthiness.

▶ ▶ ▶ Explore more IT & Technology Business Finance to learn more on how we can help support your business, or start a new enquiry with us.

Alternatives to Asset Finance for the IT & Technology Sector

Asset finance is not the only path to acquiring IT or Tech equipment. Businesses can also explore other financing avenues to suit their requirements.

Alternative finance options include:

Business loans – These can be used to purchase commercial vehicles outright or to refinance existing debt.
Learn more about how Portman can support business loan funding, below.

Credit cards – While not typically recommended for large purchases, credit cards can offer short-term financing options for your business.
If you’re unsure on Business Credit Cards, read our article A Guide to Choosing the Right Business Credit Card for additional support.

Equity Financing – Raising capital by selling shares in your business can provide funds for equipment purchases.

Grants & Subsidies – Grants and subsidies could be a beneficial way to fund your business. Its important to research the criteria and whether your business could benefit from a grant.
Take a look at the available UK Government Innovation Grants for more information.

Business Loans for IT & Technology

Business loans can provide a lump sum of money borrowed to purchase assets. This can be a beneficial choice for flexibility in use of funds, with potential for lower interest rates in comparison to asset finance. Business loans require strong creditworthiness and tend to have longer repayment terms.

We provide an array of business loans that may benefit your business:

Term Loans

With term loans, businesses can acquire essential equipment at competitive rates while maintaining a predictable cashflow. This stability is ideal for long-term planning and growth.

▶ ▶ ▶ Browse Business Loan Options

Short-Term Loans

For businesses facing time-sensitive equipment needs, our loans offer a rapid solution. While interest rates may be higher, these loans are ideal for those who can repay promptly.

▶ ▶ ▶ Explore Short-Term Loan Options

Flexi Loans

Experience the freedom of flexible financing. With our flexi loans, you can adjust repayment terms and access additional funds on demand. Adapt to changing market conditions and optimise your business performance.

▶ ▶ ▶ Discover Flexi Loan Options

Bridging Loans

Need a quick cash infusion? Bridging loans are perfect for businesses looking to bridge the gap between selling old assets and acquiring new ones. Ideal for companies with a clear plan for asset disposal, these loans offer a flexible solution for short-term financing needs.

▶ ▶ ▶ Find Bridging Loan Options

IT & Technology Finance Solutions from Portman

At Portman, we understand your business’s growth hinges on the right financial decisions. Selecting the best asset / equipment finance solution requires careful consideration of factors such as equipment cost, your company’s financial standing, repayment preferences, and long-term objectives.

We offer a dedicated team that is committed to understanding your specific needs and guiding you toward the most advantageous financing option. Contact us today and we can use our expertise to tailor a solution that aligns seamlessly with your business goals. Enquire with us online or visit our dedicated IT & Tech sector page to explore your options and boost your business growth.

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