LEASING

When customers lease assets, they enter into an agreement giving them the use of a particular asset at an agreed fixed rental over a period of normally two and five years. At the end of the period, the equipment can continue to be used for an annual "peppercorn" rental, or it can be sold with the finance company's prior consent, with the majority of the sale proceeds being refunded back to the customer. VAT on monthly rentals is a reclaimable expense, and leasing rentals can normally be offset against taxable profits.

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HIRE PURCHASE

Sometimes expressed as lease purchase, this form of contract hire enables firms to pay for assets while they earn revenue. Title of the asset is transferred to the hirer for a nominal sum with the last payment. The customer claims any Capital Allowances available. The VAT is normally paid in full with the deposit and claimed back on their next return.

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REFINANCING

Uses for refinance:

1. Reducing the bank's exposure
2. Funding a business expansion
3. An injection of cashflow
4. To cover a bad debt
5. Restructuring existing borrowing

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