Hire purchase finance and Lease purchase finance
Hire purchase is also referred to as lease purchase and enables you to gain the eventual ownership of the asset at the end of the repayment term.
You are able to claim the same Annual Investment Allowance (AIA) as an outright purchase and you can also reclaim VAT on the capital cost of the asset. HMRC have been varying the AIA available to businesses in order to stimulate capital investment.
Tax allowances may also be available on the interest element of payments, and VAT is paid in full at the start of the agreement.
The link to HMRC will enable to you see the current status https://www.gov.uk/capital-allowances/annual-investment-allowance – open in new window
Flexibility can be built into all of the above facilities to meet your individual business requirements.
We can structure payments to meet tax planning or budget constraints, and similarly defer and offer payment holidays or step payments as your business continues to grow.
Lease finance or finance lease
Leasing agreements are also referred to as rental, hire and finance lease allow you to benefit from the full use of an asset with minimum initial cash outlay. You do not pay the vat on the equipment invoice price but you do pay vat on the repayment amount.
Payments have various options dependent on the contract, but can be made in monthly, quarterly or annual instalments – and the lease period is usually set to match the useful life of the item that is being leased, normally from 2-5 years.
At the end of the agreement there are several options available which are continue to lease the equipment, return it to the finance company, purchase via a third party.
Flexibility can be built into all of the above facilities to meet your individual business requirements.
We can also accelerate payments to meet tax planning or budget constraints, and similarly defer and offer payment holidays or step payments as your business continues to grow. The whole of the rental (which is subject to VAT) may be offset against tax.
Maintenance packages can be collected alongside the lease rental so giving you fixed cost useage of the equipment for the period of the lease.
Operating lease
Operating Lease agreements are also referred to as rental, hire and contract hire and are usually off balance sheet and paid for from your revenue budget rather than your capital budget. An operating lease rental is usually lower than a finance lease rental because part of the cost price is deferred and held by the finance company.
Repayment profiles are the same as leasing however at the end of the operating lease period you do not own the asset and would normally continue to hire it by negotiation or return the equipment.
Flexibility can be built into all of the above facilities to meet your individual business requirements.
The whole of the rental (which is subject to VAT) may be offset against tax.
Maintenance packages can be collected alongside the operating lease rental so giving you fixed cost useage of the equipment for the period of the operating lease.
Business loans
If the equipment type does not meet the asset finance requirements due to the nature of the asset (eg IT software, training,installation), age or some other criteria then a business loan may be suitable to finance the capital outlay.
It may be you have a finance requirement for a non-capital item in which case a business loan will be appropriate.
A business loan via Prolease Finance is an alternative to a bank loan and gives you the same financial and accounting position as hire purchase above.
Stage Payments
Stage payments are often required by suppliers providing a bespoke item of equipment or for equipment that needs building and is on a long lead time. A stage payment facility will pay your supplier the payments they require on their due dates eg 30% on order, 30% on shipping, 30% on delivery and 10% 30 days after commissioning. This is a great way to get your equipment on schedule and protecting your cash flow.
Once the equipment is delivered and operating to your satisfaction we will pay the final invoice amount. Usually the finance agreement will commence at the time of the first stage payment.