Asset Finance
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There are two main ways you can pay for an asset that your business requires:

  • Buy it outright
  • Hire purchase or lease

Buying outright can be a good option if you have the capital available or if it is essential that you own the equipment, albeit large capital expenditure can affect your cashflow and it is often better to finance an asset even if you could purchase it outright. In addition with both Outright Purchase and Hire Purchase you are taking a risk on the residual value of the asset when the time comes to sell it, whereas with a lease arrangement this is usually fixed at the start of the lease so you have a quantifiable figure to work with.

If an asset is financed by hire purchase or leasing this:

  • allows you to use an asset over a fixed period in return for regular payments
  • lets you choose the equipment you require, with the finance company buying it for your business to use
  • usually makes your business responsible for the maintenance of the asset

If you lease the asset, a finance company buys the equipment on behalf of your business and you pay for the asset in regular instalments over a fixed period of time. Leasing means you may never own the asset outright, although some lease arrangements let you buy the asset at the end of the agreement. However, you can often update your equipment without the expense of buying newer models. The business can generally deduct the full cost of lease rentals from taxable income as a trading expense though tax advice should be obtained before committing to a lease agreement.

With hire purchase, the business owns the asset once all the payments have been made. You can also claim capital allowances against tax from the beginning of the hire purchase contract.

It is important that capital investment decisions are properly evaluated before committing to an asset purchase and the impact on your cashflow is known so you can determine the best way of funding the purchase. Inspired Business Vision work with a network of asset finance specialists who will be able to recommend the most suitable option to fund your purchase.

Contact Us now to see how we can help your business with asset finance.

Link to Case Study

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