Hire Purchase (HP)

The most common way to fund the purchase of business assets is through a Hire Purchase agreement. Assets can be new or used.

The asset itself forms the main security for the loan. Additional security may be required on a case by case basis.

Examples of assets that can be bought through HP include the following:

• Vehicles
• Machinery
• Tooling
• Yellow Plant
• IT Hardware
• IT Software
• Property Fixtures & Fittings
• And much more

There is a benefit to business cash flow by paying for an asset over several years, in regular instalments, rather than paying in one lump sum. Loan terms can be anything from 12 months to 10 years.

Deposits are usually required, but not always. Deposit amounts can vary from VAT only to 25% of the net cost plus the full VAT. Part exchanges can be used and are classed as a deposit contribution.

Interest rates can be fixed or variable and set up fees are usually very low. Lenders typically charge a nominal fee rather than a percentage of the overall loan amount.

Hire Purchase agreements can be very flexible. Low start options (reduced repayments at the start), VAT deferment (VAT bridging finance), bespoke repayment profiles (monthly, quarterly or annually) and balloon payments can all be considered.As the name suggests, the asset is technically hired over the term of the loan and then automatically purchased on completion of the final payment. Throughout the agreement, the asset remains under the control of your business and sits on the company balance sheet from an accountancy perspective.

Some examples

Case Studies

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