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Hire Purchase: The most popular form of asset finance and sometimes known as Lease Purchase, typically used for financing cars, vans and other capital equipment. The customer enters into an agreement with the finance company who then own the asset during the hire period. When all monies are paid on the agreement, ownership of the asset is passed to the customer. Terms are normally from 1 to 5 years with payments structured to suit cashflow and seasonality. Any VAT is payable on signing on the full purchase price of the asset and is usually reclaimable. Assets which are on Hire Purchase will normally appear on the business balance sheet and therefore attract capital allowances at current rates. Finance Lease: An alternative to Hire Purchase, typically used for financing cars, vans and other capital equipment. Terms are normally from 1 to 5 years with payments structured to suit cashflow and seasonality. Legal title remains with the finance company providing the lease but the rentals you pay can normally be offset against taxable profit. The payments are calculated to collect the full value of the asset plus finance charges during the lease period. At the end of the lease period the asset can either be sold to a third party in which case you would receive a high proportion of the sales proceeds or you can continue to lease the asset for a further period paying a nominal annual rental, typically the equivalent of one months rental. VAT is paid on the rentals as they fall due so there is minimal outlay at the start of the agreement. VAT is usually reclaimable. Operating Lease: This type of agreement is more like a regular rental of an asset where the lessor (finance company) expects to either sell the asset in the second hand market or lease it again at the end of the agreement period. There may be an option to extend the agreement period at the end but this cannot be negotiated at the outset. As with a Finance Lease you will not be the owner of the asset and are responsible for maintaining and servicing. Rentals are usually substantially lower than a Finance Lease as future asset value is taken into account and reflected in the rental. Terms are normally from 1 to 5 years with payments structured to suit cashflow and seasonality. Both Operating Lease and Contract Hire are off balance sheet. Contract Hire: This is a form of Operating Lease, very popular in the car market but becoming increasingly used for funding commercial vehicles and plant. A Contract Hire agreement includes a number of additional services to that of an Operating Lease such as maintenance and servicing. The benefit of this is that you know exactly what you are paying every month for the life of the agreement, therefore giving you the ability to budget without having any surprise repair bills or service costs. Terms are normally from 1 to 5 years with payments structured to suit cashflow and seasonality. Both Operating Lease and Contract Hire are off balance sheet. There are tax differences between the above options and it is important to take an accountants advice if you are unclear about this aspect. Rural and Commercial Mortgages: This is a secured loan. A charge is taken on property or land as security. Normally loans are obtained up to 70% loan to value although there is some flexibility. Fixed or variable rates are available with the terms normally from 5 to 25 years. Commercial Mortgage loans can be used for land or property purchase, financial restructuring, property construction or re-development. With all of the above options seasonal payments can be arranged to suit your own cashflow. e.g. A business linked to tourism may want to make repayments from May to September when visitor income is highest or a farmer may want repayments linked to harvest proceeds. Cashflow Finance ( Factoring and Invoice Discounting): Various options are available to help you to control your cashflow and make it work for you. You can immediately borrow up to 90% of the value of your unpaid debtor invoices. The options can vary from a full factoring package where the factoring company will effectively take control of your debtor ledger and collect and insure debts, to various forms of invoice discounting where you still retain control but simply borrow against your unpaid debtors. We can guide you through the various options and tailor the best one to suit your requirements. Credit Insurance Credit insurance is a stand alone product which will provide you with the peace of mind to expand sales with the knowledge that you will definitely be paid. The insurance company will advise and set credit limits and all invoices will be paid in the event of the insolvency of any customer covered by the insurance up to the limit agreed. We can guide you through the various options and tailor the best one to suit your requirements. |
 A Member of the National Association of Commercial Finance Brokers |
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