The customer pays the supplier or the funder a deposit normally including the VAT, this is deducted from the overall cost of the asset being purchased.

The balance is then financed and repaid over a fixed period including interest.

Subject to underwriting criteria, balloon payments can also be built into the structure in order to further reduce the monthly repayments.

Once the final monthly repayment is made, along with the Option to Purchase Fee, the funder transfers title to the customer and they take legal ownership of the asset.

(1-3 Month VAT deferrals may be available on a case by case basis.)

Finance Lease differs from Hire Purchase as the customer is paying for the use of the asset, rather than paying to take ownership at the end.

The customer makes an initial rental payment, followed by a fixed term of rentals and balloon payment (If applicable). The VAT is spread across the rentals rather than paid in advance, lowering the initial cost to the business.

Unlike Contract Hire at the end of the agreement rather than handing back the asset the client can do one of two things:

1) Sell the asset to a third party on behalf of the funder and receive the larger share of the sales proceeds, or

2) Extend their use of the asset by entering a secondary rental period and paying one annual peppercorn rental- often equivalent to one monthly rental. Notice periods to exit a secondary rental period will apply.

Operating Lease (also applies to Contract Hire) is a product to finance the hire of an asset for a set period of time, rather than overall ownership.

The customer would have use of the asset for a fixed monthly rental, for a set period of time and anticipated mileage.

At the end of the contract the asset is returned to the Lessor. (Finance Company)

The customer is not responsible for the disposal/resale of the asset.

The only risk to the customer is if the asset is returned having exceeded the mileage limit or in poor condition outside of fair wear and tear conditions.

Sale and Hire Purchase Back is a common tool in commercial finance used to protect cashflow.

If a business has purchased an asset outright, within 30-90 days (funder dependent) it enables the business to sell the asset to a finance company.

This releases a portion of the equity back into the business, the agreement is normally on a standard Fixed Term Hire Purchase Agreement, so the monthly repayments are fixed and simple to budget for.

At the end of the agreement, once the Option to Purchase Fee is paid, title to the asset is returned to the customer. This is particularly helpful to a business if they're buying from an auction or a foreign supplier that needs paying before shipping to the UK.