Asset Finance

Asset Finance

There are so many asset finance options it can be confusing. But these are generally broken down into four areas: hire purchase and lease purchase, finance lease, operating lease and contract hire. If you need to invest in your business, one of these options could be the simple solution.

Hire and Lease Purchase

Hire Purchase and Lease Purchase are typically the same thing. Whether your business needs to buy vehicles, scaffolding, machinery, IT, engineering or manufacturing equipment or any other assets, using the asset as the security, hire purchase and lease purchase offer full ownership of the asset at the end of the agreement. Repayments can be monthly, quarterly or annually and can even be structured to suit your business’s cash flow cycle.

Asset Finance

Cash Flow

Your company’s cash flow benefits by paying for the asset in instalments, rather than in one lump sum.

Upfront Costs

Most hire purchase and lease purchase agreements will require a deposit contribution. This is usually between 5% and 10% of the net cost plus all the VAT. This can be paid in cash, by part-exchange of an existing asset or we can work on an agreement for it to be deferred until the first payment. Due to the strength of our relationship with our funders, Custom Business Finance are able to obtain zero deposit contributions in some cases.

Tax

Your business can claim writing-down allowances and can offset interest payments against taxable profits. Where applicable, the full VAT will be paid at the start of the agreement or deferred in line with your VAT reclaim date to help ease cash flow.

Interest

The interest rate can be fixed or variable. We will talk to you in more detail about these options, to ensure you make an informed decision that best suits your business needs.

Currency

If you have a regular, sustainable and proven foreign currency income, we can explore the option of securing the facility in the currency you wish to repay in.

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Finance Lease

This can be used for many types of assets also, including IT and security equipment, agricultural equipment, machinery, vehicles. If you don’t need to own the asset, then leasing might be the option that best suits your business. In a finance lease the repayments cover the full cost of the asset you wish to finance but ownership remains with the lessor. At the end of the lease agreement, you can continue leasing the asset by paying annual secondary repayments (peppercorn rental) or sell the goods to a third party and retain up to 97.5% of sale proceeds.

Asset Finance

Cash Flow

Your company cash flow benefits by repaying on an agreed schedule, rather than one lump sum payment.

Upfront Costs

You won’t be asked to pay a deposit. Instead, you pay rentals in advance, from as little as one monthly rental. VAT will also be spread over the term of the agreement.

Flexible

Rentals can be structured according to your anticipated cash flow.

Tax

All or part of the rentals can be offset against taxable profits.

VAT

VAT can be spread across the term of the agreement.

For VAT qualifying-vehicles, typically, 50% of the VAT can be reclaimed on rentals and the sale proceeds of a car. Where the car is a ‘pool’ car, or you have finance leased a commercial vehicle, 100% of the VAT can be reclaimed on both the rentals and sale proceeds. This is the same for business car finance, business van finance or other commercial vehicle finance.

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Operating Lease

Operating leases, sometimes known as ‘Op Leases’ are rental agreements with can be used to finance business assets such as heavy commercial vehicles, coaches, vans, cars and machinery. The funder will build a residual value into the lease agreement which will reduce the rental amount, helping cash flow. Businesses which need an asset for specific period or contract usually like this option. PCH (personal contract hire) is one form of operating lease which leasing companies can offer. For businesses we use the term Contract Hire.

Cash Flow

Your company cash flow benefits by paying in scheduled repayments, rather than one lump sum payment. The Funder or supplier of the Goods will apply a residual value and take the end of term asset risk. This will reduce the monthly repayment amounts, easing cash flow. This, in turn, could be used to match the value or terms of your customer contracts or lower cash outflow to beat your competitor's pricing.

Upfront Costs

You won’t be asked to pay a deposit; instead, you will be asked for repayment in advance, from as little as one month’s repayment, but, more typically, three months upfront payment. VAT will be spread over the term of the agreement.

Fixed Maintenance Contracts

Fixed maintenance contracts can be built into the monthly repayments.

Tax

All or part of the rentals can be offset against taxable profits. The asset can normally be treated as ‘off-balance sheet’ (subject to your auditors’ approval).

End of Lease Options

At the end of the primary term, you can return the asset, extend the period or seek to act as agent in the sale of the equipment.

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Contract Hire

If you want to lease a vehicle or a fleet of vehicles for your business, then Contract Hire provides the solution. The contract hire rental will include the road fund licence for the vehicles and they can be hired on a fully maintained basis so you can simply insure, fuel and go.

Asset Finance

Cash Flow

Your cashflow benefits by paying monthly repayments, rather than one lump sum payment. With one fixed monthly rental, you can spread the cost of vehicle hire over the useful life of the vehicle. Fleet management is available for growing fleets, meaning it can grow with your business.

Upfront Costs

You won’t be asked to pay a deposit. Instead, you will be asked for repayment in advance, from as little as one monthly rental but typically three months in advance. VAT will be spread over the term of the agreement.

Buying Power

You can benefit from the purchasing power of the Contract Hire company with vehicle prices significantly discounted along with associated maintenance costs.

Tax

All or part of the rentals can be offset against taxable profits.

VAT

Typically, 50% of the VAT can be reclaimed on rentals for a car and 100% on the maintenance costs. If you contract hire a commercial vehicle, 100% of the VAT can be reclaimed on both the rentals and the maintenance.

End of Lease Options

At the end of the primary term, you can return the vehicle and be assured that the British Vehicle Rental and Leasing Association (BVRLA) ‘fair wear and tear’ policy is applied. Equally, you may explore the option of extending the hire or purchasing the vehicle (subject to approval).

Future Value Risk

The disposal of the vehicle at the end of the contract sits with the contract hire company and not with your business.

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