 Lease | Hire Purchase (HP) | Operating Lease
All these methods enable your business to acquire the use of assets over an agreed period of time, while the cost of the acquisition is spread over this term by you making regular monthly or quarterly repayments, preserving cash in your business for other uses.
The choice of funding method will depend upon whether your business requires ownership of the asset or just use of the asset for a particular period of time. Account can also be taken of your company’s current and future tax positions in order to maximise the benefits for it.
Deposits and up front rentals are negotiable depending upon the type of asset and whether it is new or used.
Repayment profiles can be structured to meet the specific needs of your cash flow and can take into account existing financial commitments, seasonal peaks and troughs in your business cycle and other specified future events. This structuring gives your business the opportunity to obtain a funding solution tailored to your requirements.
Lease
- Legal title to the asset remains with the finance provider.
- Lease has a primary period and often a secondary period.
- Lease primary period is normally between 3 and 5 years.
- Secondary period options allow you either continuing usage of the asset by your payment of an annual secondary rental or a % share of the sale proceeds net of VAT being returned to you after the asset has been sold.
- VAT is paid on each rental throughout the primary period and secondary period, if one is provided, and can normally be reclaimed.
- Asset appears on your company balance sheet.
- Lease rentals (excluding VAT) can be deducted from taxable income as a trading expense.
- Finance agreement accounted for ‘on balance sheet’.
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Hire Purchase (HP)
- Sometimes also referred to as lease purchase or deferred purchase.
- Legal title to the asset passes to you at the end of the HP term, either automatically or
on payment of an option to purchase fee.
- HP term is normally between 3 and 5 years.
- Terms beyond 5 years can be arranged depending on the asset being funded.
- Deposit and VAT on full asset price is payable at the outset.
- VAT can normally be reclaimed.
- Capital and interest is repaid over the term of the agreement.
- Any available writing down allowances can be claimed by you.
- Interest element can be deducted from taxable income as a trading expense.
- Finance agreement accounted for ‘on balance sheet’.
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Operating Lease
- Legal title to the asset remains with the finance provider.
- Assets suitable for this type of leasing are usually those which have a well-established second-hand market.
- Funding term is normally between 3 and 5 years.
- Asset returns to the finance provider at the end of the funding term.
- You make use of the asset for a lower rental than that charged in alternative types of finance facilities over the funding term.
- Some forms of operating lease incorporate maintenance, repair and upgrade opportunities as part of the rental.
- Rentals (excluding VAT) can be deducted from taxable income as a trading expense.
- VAT can normally be reclaimed.
- Subject to its structure conforming to accounting regulations and qualifying it as an operating lease, the finance agreement can be accounted for ‘off balance sheet’.
Whether you are a business or a supplier of equipment our expertise in asset finance is available to you. We look forward to speaking with you.
To discuss your specific requirements please contact us on
T: 01883 734625
M: 07774 768133
E: info@acumenassetfinance.com
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