The most common finance contract, generically called HP or asset finance, it allows for a business to purchase essential operating assets now and spread the cost of the purchase over the useful life of the asset. Generally funding is available for items that have a quantifiable residual value at the end of the term of the finance agreement. Asset finance is most commonly used to acquire plant and machinery, computer and digital office equipment, cars, commercial vehicles and trailers. Hire Purchase (sometimes referred to as conditional sale) is classed as a purchase whereas finance lease is a form of rental and each product is treated differently from an accounting point of view. The VAT on the purchase price is paid at the outset of the agreement.
- Financing for up to 100% of purchase price
- VAT payment deferred to match cash flow of VAT reclaim
- Payment structure agreed at outset can be designed to match cash flow if required
- Final lump (or balloon) payment can help reduce regular payments where beneficial
- Equipment can be purchased for nominal fee at end of term (option to purchase fee)