Asset Finance

Asset finance is a well know and trusted way for businesses to buy capital goods for use in the business.

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There are a large number of experienced asset finance companies, many of who specialise in a particular industry of asset type. Asset Finance is made up of,

Hire purchase

Hire purchase is the oldest method by which a person or a business may buy an asset and pay for it by making regular fixed payments over an extended period. Lending may be on either a fixed or variable rate of interest, periods generally up to 7 years are available. Stage payments, seasonally adjusted payments, are available for certain assets. Assets appear on the balance sheet of the borrower, who pays and reclaims the VAT on the goods.

Equipment Leasing

A well-established method of funding the purchase of capital assets. The lessor buys the asset and rents it to the lessee on a lease. Which means he has it immediate use for a fraction of the cash price up-front. Leases fall in to two categories,

Finance Leases

In many ways a very similar offer to Hire Purchase. Periods of up to 7 years are common and repayments are made over a definite period, at the end of which the lessee will either dispose of the goods and retain the bulk of the proceeds or pay an annual ‘pepper-corn’ rent to retain use of them.

Operating Leases

Under an operating lease the lessor buys the goods and leases them to the lessee. However the total of the lease payments will total a sum significantly less than the cost of the goods. This arises because the goods are returned to the lessor at the end of the lease and disposed of by them to recover the sale proceeds. The lessee can never own the goods and they will not appear on his balance sheet.

Contract Hire

In most ways the same as an operating lease. However, within the payments made by the lessee to the lessor will be an amount for additional amount for services such as maintenance or other goods related services. The goods can never belong to the lessee and will remain off balance sheet. Commonly found in the leasing of motor vehicles.

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