Asset Finance Products

Hire Purchase

The customer selects the supplier of the asset and negotiates directly the specification and the price.

An initial deposit plus the full VAT, if applicable, is paid leaving the balance, plus interest, to be spread over an agreed term, typically 1-5 years.

The finance company pays the supplier and lets the asset to the customer under the terms of the Hire Purchase agreement.

Once the customer has made the required regular rentals, he is entitled to buy the asset at a nominal price, known as the option to purchase fee. Until this happens, the asset belongs to the finance company as their security.

On all Hire Purchase agreements the equipment is shown on the balance sheet as a fixed asset and depreciation and capital allowances are accounted for as if the equipment were purchased outright.

The benefits of Hire Purchase are:

• The equipment is owned at the end of the agreement
• Existing bank credit lines are not tied up
• The agreement can be settled at any time
• Rentals can be monthly, quarterly, semi annual, annual or seasonal
• There are both fixed and variable rate schemes available

Hire Purchase is suitable for both businesses and private individuals.

Finance Lease

The customer selects the supplier of the asset and negotiates directly the specification and the price.

An initial deposit or advance rentals are paid leaving the balance, plus interest, to be spread over an agreed term, typically 1-5 years.

The finance company pays the supplier and leases the asset to the customer under the terms of the Finance Lease agreement.

VAT is payable on the deposit as well as each rental and can be claimed back within the VAT period.

The customer is not entitled to become the owner of the asset at any time but is entitled to sell the asset at the end of the lease and keep between 95-99% of the proceeds. The customer can however continue leasing the equipment by entering a secondary period with annual rentals.

On all Finance Lease agreements the equipment is shown on the balance sheet as a fixed asset. The finance company can claim capital allowances and pass this benefit onto the customer.

The benefits of a Finance Lease are:

• The initial VAT payment is lower than that of Hire Purchase or a cash purchase
• Existing bank credit lines are not tied up
• Rentals can be monthly, quarterly, semi annual, annual or seasonal
• Fixed rentals for accurate budgets.

Finance Lease is normally suitable only for businesses.

Operating Lease

This is designed for businesses that wish to operate equipment and vehicles with fixed rentals, minimal administration and without affecting balance sheet ratios.

The customer can never obtain title to the asset and at the end of the contract the equipment is returned to the supplier or finance company.

The asset does not appear on the balance sheet and rentals are offset against taxable profits. VAT is payable with each rental and can be claimed back within the VAT period.

Contract Hire is a form of Operating Lease and allows the customer to build in further fixed costs such as repair, maintenance and servicing.

The benefits of an Operating Lease are:

• Rentals are usually lower than a standard Hire Purchase or Finance Lease
• Earnings to assets and gearing ratios are improved
• Total budgetary control as all costs can be built in and fixed for the term
• Operating Lease is normally only available to businesses.

Re-finance

Are you asset rich but cash poor?

Sale and Lease Back or Sale and HP Back could be the answer you have been looking for.

If you have plant or vehicles that are paid for why not utilise their value to raise capital for cashflow or business expansion purposes?

You would invoice the assets to the finance company who in return will pay you the invoice value and enter into a Hire Purchase or Finance Lease agreement with fixed payments over an agreed term.

This is an alternative to taking a loan from your bank and leaves those resources free.