A huge proportion of asset finance arrangements are ‘hire purchase’ contacts. This means the business gains immediate access to the product/asset and will pay to hire it until the end date that the hire purchase contract states. At the end of the contract, the business will have outright ownership. The length of a hire purchase contract is most commonly between one and six years. However, different lenders have different policies, with shorter and longer contracts often available.
For businesses such and agricultural and haulage companies that require specialist equipment to operate, financial provisions need to be in place to ensure that should a new piece of equipment be required, the business does not suffer and can replace/add to their equipment inventory quickly. This is why many businesses of this nature choose to lease equipment, playing monthly for the rental of apiece of equipment for a pre-determined number of months/years.
Please note that when leasing an asset, you will not own it at the end of the contract period.
Asset refinancing agreements are suitable for businesses that have already invested in equipment and now need to release some of the capital tied up in them. The lender buys the equipment from you and leases it back to you over a set period of time. During this time, the business makes regular payments to the lender.