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Hire Purchase (HP)
Hire Purchase is another common form of asset finance that allows a business to spread the cost of an asset, along with any interest, over an agreed period through fixed monthly instalments. While the business is using the asset throughout the term, it does not actually own it during the agreement. The business is, however, responsible for the ongoing maintenance, insurance, and repairs of the asset.
At the end of the term, ownership of the asset transfers to the business. Hire Purchase offers an excellent way for businesses to benefit from either new or used assets without the need for a large upfront investment.
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Finance Lease
A Finance Lease is a widely used form of asset finance that enables a business to use an asset while renting it for an agreed period. In this arrangement, the funder purchases the asset and leases it to the business in exchange for fixed monthly payments over the agreed term. The finance company retains ownership of the asset, and is typically responsible for the maintenance and servicing of the asset.
At the end of the rental agreement, you may have the option to:
- Extend the lease for a further period,
- Purchase the asset at a predetermined residual value,
- Return the asset to the finance provider.
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Personal Contract Purchase (PCP)
Personal Contract Purchase (PCP) is a popular option for car finance, where the borrower makes lower monthly payments compared to a traditional loan, after paying an initial deposit.
At the end of the contract term, you have the option to:
- Make a final balloon payment (also known as the Guaranteed Future Value, or GFV) to own the vehicle,
- Return the vehicle to the finance company,
- Trade it in for a new vehicle.
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Asset Refinance
Asset Refinance involves using existing valuable assets as collateral, where the business sells the asset to a lender and finances it back for continued use. This option allows businesses to unlock cash that is otherwise tied up in assets they already own. The business retains full use of the asset, which can be one it owns outright or one that is already subject to a finance agreement.
Types of assets that can be used as security for asset refinancing include:
- Machinery,
- Equipment,
- Vehicles,
- Commercial property.
Asset refinancing can provide businesses with immediate access to working capital and improve cash flow, without the need to sell vital assets.
