Types of Asset Finance

At Thames Valley Asset Finance we have developed a comprehensive suite of asset finance products. This enables us to provide UK businesses with effective, tax efficient and cash flow structured funding solutions.

We arrange asset finance for a diverse range of UK businesses every year. Want to know how Thames Valley Asset Finance can help your business? Please visit our case studies to see a selection of recent asset finance transactions we have arranged.

Our key finance products are outlined below, if you are still unsure what you need please contact us. We can offer sound and sensible advice on what type of asset finance facility is most suitable for your business.

Hire Purchase
The traditional method of acquiring capital equipment and still the most popular with most UK businesses. The asset is capitalised in the balance sheet with the client taking the risks and rewards of ownership. Enables the asset cost to be spread over a period of time, thus preserving working capital. Title in the asset rests with the lender until the loan is repaid.

Lease Purchase
Similar to Hire Purchase and again an “on balance sheet” facility. Key difference is that the repayment of the loan can be structured around the perceived future value of the asset and/or the cash flow of your business. Repayments can be calculated around the seasonality of your business if required. A capital element of the loan can also be deferred until the end of the finance agreement thus reducing the loan repayments.*

*typically referred to as a balloon payment.

Finance Lease
Essentially a “hire” contract between a lessor (the lender) and a lessee (customer) for an asset over an agreed period of time (the hire period). A funding facility that allows a client full use of an asset without actually gaining title. The motivation for using a finance lease can be for many reasons, primarily tax benefits or the cash flow advantage due to the treatment of the VAT on the lease rentals.

Operating Lease
As with a finance lease, this is a “hire” contract. The major benefit is that this is often treated as “off balance sheet” and thus a cosmetic manoeuvre as deemed to not affect the borrowing of the business. Acquiring assets in this way is not view as capital expenditure. At the end of the lease the lessee (customer) has a number of options including extending the hire period or returning the asset.

Contract Hire
As with both finance and operating lease, this is a “hire” contract. Contract Hire is used to fund new cars and light commercial vehicles, with the lessor (lease company) proving a customer (lessee) with the use of the vehicle for a fixed period of time (the contract period). The customer has none of the risks associated with “ownership” and simply hands the vehicle back at the end of the contract duration. The rental cost can include the provision of road fund licence, tyres and routine servicing and the lease payments are calculated around the future re-sale value of the motor vehicle and a stipulated contractual mileage (e.g. 15k miles per annum).

Sale and Leaseback
Is a popular method of releasing cash back into a business by way of refinancing the existing “owned” assets of a business. The transaction structure is similar to a finance lease and sale & leaseback is a common method of raising monies to fund expansion, product development and acquisitions/mergers.

Chattel Mortgage
A loan secured by a charge over assets owned by the business already. This facility is used where a business wishes to own the equipment but has already purchased them. In this scenario a Hire Purchase facility cannot normally be entered into. The loan is secured by way of a charge (known as a chattel) over the asset(s) being funded. Because of the way the loan is secured a Chattel Mortgage is not suitable for motor vehicles and small items of plant.

Premium Funding
Is available to professional bodies, such as Accountancy and Legal practices. This facility allows the annual cost of Professional Indemnity Insurance to be funded via a loan facility, available for periods of up to twelve months. The facility preserves cash flow for a business, by spreading the cost of the insurance premium over the full financial year.

Commercial Loan
An unsecured loan facility, available for assets that offer little or no real tangible security. Often used to fund software licences, refurbishment costs, small items of plant and ancillary office equipment. No charge taken over the assets to be funded, in effect similar to a traditional bank loan.

Want to know more about our finance products?

Please contact us today, Thames Valley Asset Finance welcomes all asset finance enquiries for vehicles (cars, vans and trucks), equipment, plant and machinery finance. TVAF would be delighted to answer any questions your business has about asset finance, or discover more about the types of asset finance facilities we arrange by viewing our case studies