Finance Lease

What is it?

A finance lease is a commercial arrangement involving an asset (equipment, vehicle, software etc.), a lessee (customer or borrower) and a lessor (finance company). The customer chooses an asset which the finance company purchases. The customer then pays for use of the asset for the duration of the lease. Title of the asset remains with the finance company whilst the contract is in its primary period. {Lease payments are considered an allowable business expense, and so can be offset in full against corporation tax.}

What happens at the end?

There are broadly 3 options; Upgrade, Return or Retain. As the lessee you aren’t able to take title directly from the lessor, but if you’d like to continue using the asset once the lease has finished there will often be a way to do so.

Hire Purchase (HP)

What is it?

Hire Purchase (sometimes referred to as ‘Lease Purchase’) is an agreement between a buyer and finance company that states from the outset the buyers’ commitment to eventually purchase the asset.

A finance company acquires an asset for the buyer who pays a deposit to take possession of it (often equivalent to a single advance repayment + the full VAT liability but may vary depending on circumstances). They then complete the purchase over time by making a series of regular repayments. The finance company retains ownership until all the instalments have been made.

What happens at the end?

Upon payment of the ‘option to purchase’ fee (assuming all other obligations have been met), the buyer inherits clear title of the asset from the finance company.

Operating Lease

What is it?

An operating lease is a contract between a lessee (customer) and lessor (finance company), which generally runs for a period of time shorter than the full economic life of the asset. The predicted future value (residual value or ‘RV’) of the asset is factored in when calculating the lessee’s repayments, and the lessor takes the associated risk.

What happens at the end?

At the end of an agreement the lessor will look to recover the full cost of the asset either by re-hiring it on a new contract, or selling it to realise the RV. In some cases it is possible for the lessee to continue to use the asset by agreeing to rent it from the lessor once the contract has finished.

School Operating Leases

Some of our funders offer versions of operating leases designed specifically for schools. If you work with or within education please contact us to find out more.

NHS Operating Leases

NHS Trusts have their own unique set of requirements when using finance. To help cater for this we also offer specialist products such as variable rate operating leases.

Commercial (Business) Loan

What is it?

A loan involves the transfer of funds directly from a finance company to a business looking to borrow. Scheduled repayments are then made by the borrower over an agreed period of time, until the original loan + interest has been repaid in full.

The loan providers we work with all offer fixed repayments and in the majority of cases are not secured against existing assets (personal guarantees may be required).

What is it best used for?

Unlike lease and hire purchase products, a loan isn’t tied to a specific asset or assets. This means it may be a more suitable solution for projects where a significant portion of the costs are associated with services such as building work, consultancy, engineering, cabling etc.. Other uses include working capital requirements (including corporation tax & VAT loans), inventory/stock purchase, debt consolidation, one-off business costs, or simply funds to help grow your business.