Asset finance leasing - XL Business finance
  XL Business Finance Blog » hire purchase

Posts Tagged ‘hire purchase’

hire purchase fixed or variable rate?

Saturday, May 15th, 2010

We have come across a very interesting scenario in the last week or so whereby another broker had bee quoting a very very cheap rate on a hire purchase deal. Not wishing to criticise my fellow broking colleagues I suggested to the customer that maybe  not all is at it should be.

 Most finance companies have the same funding costs and they have the ability to link it to fixed rates or variable rates. At the time of writing this article the cost of fixed funds for most finance companies is around 4.o%. I would suggest that a margin of 2.5-3% would be a fair return giving a nominal rate to the customer of about 6.5-7%. Therefore when a customer was being quoted 5.5% on a hire purchase deal one can only deduce that the broker was about to sign the deal up on a variable rate. Most finance companies on a variable are taking a min base rate of around 3% so this would seem to stack up.

At a time when interest rates are really low it would make sense to go for the slightly more expensive fixed rate because rates are only going to go up but maybe not in the immediate future. At the end of the day it must b the customers choice and as such the customer must be aware as to what he is signing up for. As provision of  hire purchase or finance lease to business users is totally unregulated the end user must be aware that even a written quote may not contain this vital information

Aldermore Bank Plc enters asset finance market

Monday, May 10th, 2010

In the last  month or so a new asset funder has entered the broker market providing a much needed alternative to ING  Lease. Aldermore Bank have entered the  asset finance market as a direct competitor or alternative to ING.

Not that there is anything wrong with ING Lease. Far from it. Over the last 10 years they have been without a doubt the most consistent and effeficient finance provider  in the leasing and asset finance market. However during the last eighteen months  they have been the only serious  funder. Prior to the credit crunch there were at least 4 finance companies that we could have obtained competitive finance and hire purchase facilities. They include Lombard, Barclays, Yorkshire Bank and ING Bank. All were doing extremely competitive deals in order to win your business. However as the credit crunch took hold they all withdrew their leasing facilities and were only doing deals for their very best customers. As such ING has been bursting at the seams and once a customer was at he maximum level with INGthere has been very few alternatives. The only alternative were very expensive second or third tier lenders that without a doubt would have all required guarantees irrelevant as to the quality of the covenant or asset based lenders that are only able to lend against the trade value of the kit.

Therefore having a new prime funder in the market is good news for everyone including ING. Whilst we are not expecting Aldermore to replace ING they will certainly mop up the stronger credits where ING are full. I think it will take some time before they take on the marginal deals but none the less still good news!

A guide to financing new equipment and machinery purchases

Wednesday, April 28th, 2010

At a time when many of the high street banks and finance companies are still difficult to deal with it is imperative than any application for hire purchase or leasing facilities to the few remaining finance companies are presented in the best possible format. At XL Business finance we have over ten years of experience and expertese in organising competitive finance facilities for a variety of businesses. The following will give you an idea of the type of information that we will collate and present to the finance company.

 

1. We will require the last full set of audited accounts. We will need every single page and not just the most recent profit and loss and balance sheet.

2. We will require the most recent set of management accounts . If there has been more than twelve months since the last set of full audited accounts we will require management accounts  to the next full year and also the most recent set thereafter. As a minimum we will require a profit and loss and balance sheet. Any finance company will require the most up to date information that is available to ensure that the performance of the business is adequate for their requirements.

3. No matter how big the deal is three months bank statements will help to evidence serviceability. If three months clean bank statements can be provided then this is always be a massive positive in term of evidencing serviceability.

4. Confirmation of working capital facilities will also be useful. A copy of the bank overdraft or factoring facility letter is also a good idea to include

5. Background information will enable the underwriter to understand where the business has come from and the future plans

6. An aged debtor report will evidence the quality of your customer base

7. Most importantly we will need to provide a rational for the purchase. Is the kit replacing old kit? Will turnover increase, labour savings be made  or margins increase. It is always useful to know of any existing finance agreements coming to their end which again will evidence serviceability

8. Are personal guarantees available if any

9. Is there any other security available such as unencumbered kit or property which may help to increase security levels?

Why should you use an asset finance broker

Friday, April 23rd, 2010

To ensure that you get the best possible deal when financing your capital equipment you should use a well established and reputable asset finance broker that has been around the block a few times and knows and understands the leasing and hire purchase market. Beware of the retired  or recently made redundant bank manager as they have absolutely no idea what is available or achievable in the asset finance market. As one of the countries leading asset finance introduces we know exactly which finance companies finance what sort of assets for what sort of businesses.

Whether it is a £1.0m   refinancing of existing plant and machinery or purchasing a £5k multi function copier XL Business Finance has numerous funders with cash wanting to do deals. These might not always been well known high street funders however there are still finance companies in the market today wanting to deals. As with any sort of finance they all have their sweet spots and they expect any proposals to be put them in a way that makes them easy to understand. It maybe also that they don’t need as much info as you would normally expet a bank to require. We can certainly get a handle as to what is achievable very quickly indeed without the need for expensive business plans and projections. Allot of the time it comes down to the sort of asset and what other security is available.

And remember that finance is a risk reward business so if your business has been trading for less than three years , has an insolvent balance sheet or has shad a difficult period of trading don’t expect bank rates!

Benefits of using an asset finance broker

Monday, April 19th, 2010

Any business wishing to purchase plant and machinery will know that the banks at the moment are not the most accommodating when it comes to asset finance. During the credit crunch any independence the bank owned leasing companies had will have been pulled back in under the umbrella of the main bank. What this means is that  now there very little difference in applying for a commercial bank loan or a hire purchase or leasing facility. Indeed you will find that your application for either will probably go to the same underwriter for approval. Never has it been truer that the banks will take into consideration you overall exposure when approving any type of borrow including any outstanding finance lease facilities.

Although credit is hard to come by never has the benefits of an asset finance broker been more important. There are still one or two independent leasing companies in the market that can compete with the big banks. So long as there is not a massive difference in the cost of borrowing why use potential valuable credit lines for purchasing assets and equipment. In deed certain banks will not provide finance lease or hire purchase facilities under £100k preferring to provide loan facilities. Whilst you may think this is the easy option commercial loans do not have the same tax advantages of leasing. For the sake of taking a little effort now it will possibly give you massive benefits in the future.

XL Buisness Finnace is one on the countries lading asset finance brokers and with over 15 years experiance we know all the UKS fiannce companies. All have different sweet spotys and all do things inslightly differing ways . We have the experience and experetese to ensure the best possible funding solutions are sourced for your particulr business.

Leasing Printing Equipment

Wednesday, April 7th, 2010

XL Business Finance has certainly got a great deal of expertise and experience in financing printing equipment.  Depending on the type of equipment that needs financing a slightly different approach may be required. For example a company specialising in financing printing equipment will not usually finance digital printing equipment. 

A print finance specialist is only interested  in the forced sale value of the kit and they will know their exit route in the event of a default situation. They will have a network of dealers and suppliers and even end users that they can shift kit onto. For a business purchasing traditional litho equipment a print finance specialist can certainly add value to any business. They are not hung up with the balance sheet of the business but are more interested in the serviceability and the security in the kit. Therefore a business which is loss making or even is a new start business may be able to obtain finance lease or hire purchase facilities. And if you have a particular press in mind they may be even be able to source a repossession or find a part exchange on another deal they are working on.

This is contrast to digital printing equipment which is viewed as having very little or no security.Therefore first port of call will be a balance sheet lender or high street finance company. providing your business has a at least three filed accounts , is very profitable and has a very strong balance sheet you will have absolutely no problem obtaining finance. Of course every single business is trading exceptionally well at the moment , NOT!  There are a few finance companies that will take a view on these sorts of deals but if they are not at the races it will be very difficult to obtain funding without personal guarantees!

Is Leasing equipment cheaper than hire purchase

Sunday, March 7th, 2010

Many businesses contact us assuming obtaining leasing facilities for new equipment will be a) easier to obtain and b) cheaper than a traditional hire purchase facility. The answer is monthly repayments and ease of obtaining credit is exactly the same. The only difference being slightly different tax treatment. Which finance facility is best for your business depends on your own requirements and preferences.

In both cases the supplier will expect full payout of their invoice and therefore the hirer will be repaying the full cost of the equipment plus interest wheher it is hire purchase or finance lease.  The differing tax treatment is as follows.

With hire purchase all the VAT is paid up front and at the end of the final payment legal title passes to the customer. The equipment is shown in the customers balance sheet as an asset with a corresponding liability for the hire purchase element. The asset or equipment  is written down on a reducing balance basis and as  much as 50% of the capital cost of the equipment can be claimed  in the first year. Therefore  hire purchase may be more tax efficient in the first year especially if the business is making large profits.

With finance lease the vat is spread over the term of the lease agreement therefore from a cash flow point of view it can help businesses that are short of cash. Instead of claiming writing down allowances the monthly payment is offset in the profit and loss account and as such the full taxable benefit is obtained in exactly the same number of years of the term of the agreement. The big disadvantage of a finance lease facility is that the hirer cannot get direct title at the end of the agreement. A finance lease agreement will kick into secondary or peppercorn rentals usually the equivalent of one months payment on an annual basis. Title is usually obtained by selling the goods to a third party and retaining 90-95% of the sale proceeds.

Obtaining Finance for equipment

Thursday, February 11th, 2010

iceXL Business Finance has over 10 years of helping businesses obtaining finance for equipment by way of finance lease or hire purchase facilities. Never has it been more difficult to obtain funding. Most of the high street finance companies have totally withdrawn from  the asset finance and leasing  sector. The likes of Bank of Scotland and  Barclays used to have very active asset finance divisions which they have completely closed down. It didn’t matter if you didn’t bank with either of these two companies they would do lease and hire purchase deals for just about anyone. Nowadays they wont even do deals for their own customers. If hey do they tend to do it on loan facilities and obtaining funding is very difficult as you will be dealing with the usually slow banking process.

Thankfully there are one or two finance companies still lending money via the broker market however they have become more choosy as to what deals they will do. It is simple supply and demand. They don’t have as much cash as they used to do and they have far more delays to do then they used to have. Combined with an increasing bad debt provision it becomes understandable as to why it is getting harder to obtain credit.

It is therefore imperative that any application for finance is presented to the finance company in the best possible manner. WE don’t necessarily require projections business plans and cash flow forecasts. However we do need an understanding as to the rational for the purchase and we also need to evidence serviceability. So long as we have some recent management accounts and 3 months bank statements we will be very quickly be able to provide an indication of terms for  any available finance. It is far better to get all this information up front rather than presenting it to the finance company in dribs and drabs. We can help a business get the right information together.

Arranging Lease finance

Saturday, January 23rd, 2010

Arranging lease finance or asset finance is still increasingly difficult to obtain. The market for prime lending has changed considerably over the last eighteen months as the high street lenders are still taking a precautionary approach to lending. Before the credit crunch and the recession most of the high street banks had an asset finance division in addition to the core commercial banking. As the banks started to suffer losses and the availability of cash to the bank themselves began to dry up these asset finance divisions started to wind down these operations.

 From an independent brokers  point of view, before the recession most of the asset finance divisions would all take broker business. There was Lombard,  Bank of Scotland  , Yorkshire Bank and Barclays to name a few. Whereas now the banks are tending to look after their own customers and wont accept broker introduced  business. Therefore if you go to your own bank and perhaps you are not strong enough to get approval there are few high street options available. In addition some high street banks wont offer hire purchase or finance lease facilities less than £50k. HSBC is a prime example. They might agree a facility for you however it will be done a straight forward commercial loan which means taht if you go back to your bank for some further funding you risk the possibility of not being able to get further funding.

 The good news is that there are still one or two finance companies that deal exclusively with the broker market that are willing to take 3rd party business. XL Business Finance has had over ten years experience of helping such businesses. Credit is still tight to come by and as such we can add value to your business because we know exactly how to structure a deal for a finance company in order to get the best possible chance of approval. Believe you me it is worth the effort because the next tier of funders are extremely expensive!

Leasing Printing Machinery

Saturday, January 16th, 2010

As we know printing equipment can be categorised into two types. Digital high tech equipment and traditional equipment such as litho presses. There are a number of specialist print finance companies currently lending money and you wold think it would be easy obtaining finance as they know the market. However it is not as simple as that because different finance companies have differing views of  the suitability of  digital and non digital as security for a finance lease oir a hire purchase agreement. XL Business Finance has an area of expertise in the print sector and has been helping many printing businesses arrange finance for over ten years.

For example it is unlikely you will get a print finance specialist to finance an expensive  digital printer. A print finance company is more interested in the residual value of the equipment and their exit route if they  such a machine came back to them in a distress situation. Print finance companies know the litho market and a certain degree the flexo market very well and as such tend to stick to financing these sorts of machines.

It is therefore more likely you will get finance for a digital piece of kit or a non ltho piece of kit from a traditional balance sheet finance company. So long as we can evidence serviceability, there is no adverse information and your business is profitable than you have a good chance of geting finance approved.

The problem is when a business that has been struggling wishes to buy digital kit which is perceived as having very little security. There isn’t enough value in the kit to get the print finance companies interested and the balance sheet isn strong enough to justify an advance from a high street bank owned finance company. Potentially the only way is to provide additional security by taking a charge over existing kit or even property.

 
 
 

XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

Manchester, Liverpool, Leeds, Preston, Sheffield, Stoke, Merseyside, Lancashire, Cheshire, Staffordshire