For any business to be successful it needs the ability to grow. Growth however requires investment and paying cash up front for new equipment, machinery and vehicles can be expensive, risky and can lead to cashflow issues.
What can you do to ensure cashflow problems don't arise?
Waiting until you're in a position to pay for what you need can be an option however if your business needs it, it needs it now.
Asset finance can help you to achieve your goals, quicker and more efficiently.
Asset finance accounts for the majority of debt-finance undertaken by businesses in the UK. Around 1 in 3 small businesses that have any external borrowing use asset finance as it is a great way of releasing cash tied up within the business or extending the cash life cycle.
With any asset finance deal there are two routes you can take, Hire Purchase (HP) or Lease Finance.
Deciding which agreement is right for you depends on what you are financing and the length of time you want the finance for.
But what's the difference between Hire Purchase and Lease Finance?
We've listed some main points below to help you in your decision.
• Hire purchase gives full ownership of the asset at the end of the agreement.
• Structured repayment periods to suit your cash flow.
• Fixed monthly payments available to help with budgeting or variable rates if preferred.
• Tax advantageous as VAT is usually reclaimable and repayment interest can be offset against profit.
• Allows full use of the asset but without ownership; rentals are paid over the term of the agreement.
• Low initial costs so you can start earning from the assets immediately.
• Rentals can be tailored to your cash flow.
• Fixed interest to avoid changes in the base rate or variable interest if preferred.
• VAT is only payable on the rental not the purchase price.
• Can be tax advantageous…you could ask your accountant!
So, what does it really mean, well with Hire Purchase, you'll own the asset outright once your contract ends, with no more payments to make. Asset Finance could also be an option at this stage.
In a Lease Agreement, at the end of the primary period, you can continue to hire the equipment or arrange to sell it.
We work with you to get the best deal. If you're unsure with whether you should have a hire purchase agreement or a lease agreement contact us today.