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Which is why we created Thames Valley Asset Finance, an Asset Finance Brokers that are dedicated to supplying a comprehensive range of Vehicle, Equipment, Asset, print and construction Finance solutions in Reading, Birmingham, Manchester, London – and throughout the rest of the UK.
A form of lending that allows a business to acquire the assets it needs to operate and grow whilst spreading the cost of the purchase.
The finance is generally secured on the asset itself. Assets can include vehicles, plant & machinery as well as equipment such as security systems and air conditioning.
A portion of the amount borrowed which is deferred until the end of the loan term. Interest is payable on the balloon in return for lower monthly repayments over the loan term.
A finance agreement where the lender holds an interest in an item of movable property. The movable property acts as security for the loan. It is often used for Marine or Aviation finance.
The amount of money that a finance company will expect a customer to pay as their contribution towards an asset finance loan. The level of deposit is determined by the nature of the asset and the financial strength of the customer.
The difference between the value of an asset and any associated liability. For example, if a customer has a piece of machinery valued at £100,000 and an outstanding loan balance of £40,000 then the equity is £60,000.
A simple way of calculating the interest payable on a loan. For example, a £10,000 loan repayable over three years at 5% per annum means total interest payable of £1,500 (3 years @ 5% = 15%. 15% of £10,000 is £1,500).
A person or company provides their guarantee ie ‘promise’ to repay the debt of a third party, should that third party be unable to repay the debt themselves. The third party could be a company or an individual
Hire Purchase – a type of finance agreement that allows you to spread the cost of your new asset into easy to afford payments, all while using it in your business. Typically you will need to pay a deposit at the beginning, followed by a series of monthly payments that suit you. Once you’ve finished paying the instalments, the asset is yours.
Interest charges – The total amount of interest payable on a loan or finance agreement. This should be clearly stated on the finance documents. If you do not settle the agreement early, this is the amount of interest you will pay over the term of the agreement.
Joint & Several – this is a term often used when a guarantee is provided. Two or more people are responsible for repaying a third party debt, should that third party not meet it’s obligation. They are each responsible individually to repay all the debt as well as being responsible as a group.
Keeper – The registered keeper of a vehicle is not always the same as the legal owner. If you finance a vehicle, a car for example, a Finance House will be the legal owner of the asset until such times as the finance has been paid off in full. The customer is thus the registered keeper and not the owner.
Lease – A lease is a tax efficient way to spread the cost of acquiring an asset for a business. At the end of the lease the business has a number of options available to them. Depending upon the type of lease entered into this could include handing back the asset to the finance company, selling the asset and sharing in the sale proceeds or extending the lease term and continuing to have use of the asset.
Make & Model – It is important when financing an asset that you provide the full make and model. This allows a true assessment of it’s value. For example the Porsche 911 currently comes in over 20 different models.
Negative Equity – Whilst generally relating to property, for car finance customers, being in negative equity means that the amount they presently owe to the finance company for the vehicle is greater than the current value of that vehicle.
So it’s important to consider the deposit that is put down. Too little and you could have a problem if you decide to sell the car.
Option to Purchase (OTP) – a fee often charged by the lender at the end of the loan term, particularly where they have security over the asset(s) being financed. This additional administration fee passes good title in the asset(s) to the customer.
Period – This relates to the length of a finance agreement or loan. Lenders often refer to the loan period in either months or years.
Generally it’s between 1-5 years but for certain assets this could be extended. In addition, you don’t have to request funding over a set number of years. For example you could request a term of 42 months, if that fits with your budget & plans.
Quotation – Customers should always seek a written finance quotation before proceeding with a finance offer and they should ensure that it provides ALL of the costs relating to the loan. This should include any arrangement fee(s) payable, the interest rate, the monthly repayment, the total interest payable and any other security that may be required.
Rate of Interest – This can be expressed in many different way to include the Annual Percentage Rate ( APR ), flat rate, fixed rate or variable rate.
If you obtain more than one quote, ensure you are comparing like for like. APR for example will include any fees, whilst a variable rate will just refer to the amount of interest to be charged ( which is subject to change ).
Supplier – The car or equipment dealer supplying the asset to you. It is standard practice for the finance company to ask the supplier to address the invoice to them. The finance company will then pay the supplier on the customers behalf once all the finance documents have been signed.
The finance company will also need to be happy with who is supplying the goods.
Termination – if you are looking to terminate or end a loan or finance agreement early it is always best to discuss options with your broker or finance company. This will ensure you are aware of any breakage costs and fees.
If the agreement allows you to voluntarily terminate ( ie hand the car back ) then make sure you are aware of the full implications of this course of action, before going down this route.
Underwriter – For smaller and straightforward loans the lender may use automated credit scoring to approve or decline a loan. For larger loan requests or where the proposal to borrow money is more complex (i.e. a new start business), the lender will have an underwriter assess the application to help make a decision.
It is important therefore, that for any applications the information supplied is relevant and correct.
VAT (Value Added Tax). The majority of assets, equipment, plant & machinery that are sold are with the addition of VAT. The finance company will expect the deposit paid by the customer to include all of the VAT. The VAT is then reclaimed by the customer using the finance agreement they have signed.
There may be instances however, where a VAT deferral may be available.
Written Down Value – Is the value of a business asset after accounting for depreciation or amortisation, it is also called the book value or net book value.
The written down value is not the market value which is the price that could be obtained by selling an asset in a competitive, open market.
Xtra – ok not quite the right spelling, but what extra benefits do you get from using a specialist broker? We save you time, have access to funders that work exclusively with brokers and provide an individual service on an ongoing basis.
In addition we are experts in our field, often with many years experience.
Yield – A lender entering into a finance agreement expects that it will receive a certain return over and above it’s cost of funds. Cost of funds refers to the interest rate paid by financial institutions, for the funds they use.
Zero – you may be looking to arrange finance without putting down any deposit. Sometimes this may be possible but the decision will be depend on you, your business and what you are funding. Also some finance companies may want you to pay at least one month’s payment in advance, which is effectively your deposit.
Also don’t forget that by putting down zero or a minimal deposit you could owe more than the asset is worth if you decide to sell it before the end of the agreement. the UK.