Asset Finance

Asset finance offers many benefits to businesses and is available, in various forms - operating lease, finance lease and hire purchase - on a wide range of business equipment, plant, machinery and vehicles.

As a methood of commercial finance, asset finance has many advantages - it is tax efficient, requires no security and offers payment mechanisms to minimise the impact on your cash flow, thereby releasing capital for your day-to-day business needs.

In addition to asset finance for new purchases, OSL can also arrange sale and leaseback schemes to release capital currently 'trapped' in the company's assets. This asset sale gives your business an instant cash injection, whilst favourable leaseback terms will help regulate your cash flow management and could realise valuable tax efficiencies.

Operating lease

This type of asset finance is particularly suitable for higher value or highly specialised items. It is also highly tax-efficient; you can reclaim VAT on the repayments and may be able to offset the costs against taxable profits.

Under an operating lease agreement, the finance company buys the asset and sets it a lower residual value. You have use of the item for as long as you need it in return for a monthly repayment calculated on the basis of the residual value.

Finance lease

With a finance lease the finance company buys the asset and you pay rent to them over an agreed period so you can have immediate benefit from the item without the upfront costs of buying it yourself.

At the end of the defined period, you can either extend the rental term (at a reduced amount) or sell the asset and keep a share of the proceeds. VAT is only payable on the rent, not the full purchase price and you can normally offset the rental payments against taxable profits (although you can't claim capital allowances on the asset).

Hire purchase

Hire purchase is a great option if you need the equipment to generate income to pay for itself, as the finance company buys the asset and you pay them back over an agreed period (between one and seven years). At the end of the period you own the asset.

As a method of asset finance, hire purchase has many flexible benefits. You can choose to vary your monthly repayments to suit your cash flow and income cycles, useful if your business has seasonal fluctuations. You can choose the supplier and negotiate direct to achieve the best deal possible. You may also be able to claim capital allowances on the expenditure.

Asset Finance Case Study