Published by The Finance Place · Updated · General information
“I need £80,000 for vans or machinery”
Obtain a supplier quote showing the asset specification, age, condition, price, VAT and delivery timing. An £80,000 quote excluding VAT is not an £80,000 total cash requirement. Ask what deposit and VAT payment are due before delivery, and keep installation, training, insurance and working capital in the budget.
- Vehicles: check mileage, expected annual use, maintenance and whether replacements will be needed before the finance ends.
- Plant and manufacturing equipment: consider installation, commissioning, specialist valuation and resale market.
- Used or specialist assets: flag age, condition and supplier details early; not every lender will accept them.
Hire purchase versus finance lease
Hire purchase commonly provides a route to ownership after all payments and any purchase option are completed. A finance lease pays for use of an asset owned by the lessor; do not assume it transfers ownership at the end. Initial rentals, end-of-term arrangements and accounting or VAT treatment differ. Ask for the full written schedule, including any final payment, secondary rental or sale arrangement.
- Compare the deposit or initial rental, every instalment, fees and the final commitment.
- Confirm who insures and maintains the asset and what happens after damage or early termination.
- Ask an accountant about tax treatment rather than deducting an assumed tax saving from the payment.
A lower payment can hide a large final commitment
A balloon defers part of the capital until the end. For example, financing £64,000 with a £16,000 final balloon leaves that £16,000 still to fund even if the monthly payment is manageable. At a positive rate, leaving more debt outstanding can increase interest. Plan for cash repayment or a realistic disposal value; refinancing and resale prices are uncertain.
Compare the same asset with and without a balloon →Releasing money from existing business assets
Asset refinance can raise working capital against equipment or vehicles the business already owns, subject to valuation, existing finance and lender acceptance. Record current settlement figures and legal ownership. Releasing cash today creates a new repayment commitment and can put an operationally essential asset at risk. Do not count the asset's original purchase price as its current lending value.
Consider the underlying working-capital need →Match the repayment to the asset's economic life
Borrowing over longer than the asset is likely to earn its keep can leave you paying for obsolete equipment while funding its replacement. Stress-test downtime, weaker utilisation and a smaller resale value. Security may focus on the asset, but additional guarantees or security can still be requested. A missed payment can threaten access to equipment the business needs to trade.