Each way of financing a purchase or project can have advantages and disadvantages. A quick snapshot of some of the features can be seen below. We would be keen to discuss more in depth how each option would apply to your own business specifically to find the best fit for you. We feel it is important to give customised solutions and recommendations based on individual needs and requirements.
Customers put down an initial deposit and then make monthly repayments – with interest – over a decided period. After all the monthly instalments have been paid, they then become the legal owner of the asset.
The amount of money put down in the initial deposit and the desired term will dictate the monthly instalments – the more deposit put down, the lower the monthly payments are and vice-versa.
It enables the purchase of newer and better equipment. Advanced modern machinery can be expensive and so it’s not always possible to get the latest equipment from a full upfront payment alone. A hire purchase agreement makes these assets more available to buyers since the costs are spread.
There are many options within a hire purchase agreement that can be tailored to individual needs.
Leasing can be of benefit to those with a lower deposit available or to non VAT registered businesses amongst others. Fixed rental payments over an agreed period that covers the cost of the asset. This option usually requires a set number of rentals in advance. Options after the finished period include to continue with the lease on a secondary rental basis (a pre agreed instalment per year), return the asset or purchase the asset via an independent third party. The payments are subject to VAT which can change. This is a common way of spreading the cost of any VAT.
A finance lease is very similar to a hire purchase, but as the lender claims the depreciation, they’re different on the balance sheet.
This is a way of raising money from existing machinery/equipment . This may not be available in all areas of the United Kingdom. A common scenario is where a machine has recently been purchased outright and then an unforeseen expense occurs shortly afterwards. The funds raised can then be used for your intended purpose.
Asset refinance is one of many possible asset finance solutions to help protect the cash flow of your business. As this option can increase the term or amount of current borrowings it is important to know if asset refinance is the right solution for your firm.
With this option VAT/Tax invoices can be repaid over a set period for example over a 3 month period for VAT or a 12 month period for corporation tax. This can be used to assist a larger than expected bill or as a rolling facility to regulate cash flow.
Invoice finance is a method of borrowing money based on what your own customers currently owe you or your business. This is a way of releasing working capital (a percentage of the invoice value) from an outstanding payment ahead of when you would normally receive the payment. There are multiple different versions of this type of arrangement each with it’s own advantages and disadvantages. Many clients prefer not to disclose operating this type of facility when invoicing, and this can be accommodated.
If you are a supplier of equipment/machinery, you may heard of stocking facilities. They are often used to help a supplier to hold more items in immediate stock, by financing a set amount of the cost to bring the item into stock. This is repaid at the point of onward sale. This can be useful to take a dealership to the next level or simply to free up funds for other purposes. This type of facility can typically be used for buying in both new and used equipment.
A project loan is funding for a set purpose, usually this is constructing a building or store, but can also be for significant business investments. Repayment is made on pre agreed basis and works very similarly to a typical loan.
If you wish to discuss any of the above or for further explanations please do not hesitate to contact us.