Leasing and hire purchase

Finance that allows businesses to buy equipment, machinery and vehicles they might otherwise be unable to afford.

Leasing allows your business to use an asset in exchange for rental payments, which may include an advanced rental, over a set period.

A lease works as a rental agreement. You agree to rent an asset for a period with a fixed or minimum term and make regular rental payments for as long as the lease contract runs. At the end of the contract, you may have an option to continue renting, or to return or possibly replace the equipment.

Different types of leasing options

Finance lease

You’re responsible for paying for most of the item’s cost over the period of its life, and you’re responsible for maintaining the asset as if you own it.

Operating lease

You won’t pay for the full cost of the asset as effectively you’re renting it for a period shorter than its economic life. As a result, the lease provider retains the risk and reward of ownership, while you remain responsible for keeping the asset in good working order during the agreement period.

Hire purchase is when you agree to buy an asset from the lender over a specified period. You own the item at the end of the contract. Usually, there is a small fee to secure title to the asset.

Like lease agreements, hire purchase allows you to acquire vital equipment and machinery without large upfront costs that can put a strain on your cashflow and working capital.

Hire purchase contracts usually involve a deposit and fixed payments over an agreed term.

 

You can apply for a lease or hire purchase agreement:

  • with a finance provider
  • from an equipment provider or manufacturer
  • through a broker

With leasing and hire purchase, there are few restrictions on:

  • who or what type of business can apply
  • the type of business assets you can fund

The biggest factor in getting approval for this finance is proving that you're able to make the rental payments. And even then, you don’t necessarily need to be profitable, just cash positive.

Providers can also consider the revenues that the asset investment may generate for your business and the impact that it will have on your ability to service the rentals.

Another important factor is your credit rating. A poor credit rating could make approval more difficult but it’s not always a barrier.

Good rates of approval

Success rates are high for leasing and hire purchase applications.

Quick turnaround

Leasing and hire purchase deals are generally speedy. For standard pieces of equipment, such as a vehicle, it could take just a few days.

Few restrictions

You can access leasing and hire purchase regardless of your sector, your location, or the size or age of your business.

Flexibility

A hire purchase agreement allows you to own the asset at the end of the contract. With a finance lease, you rent the asset for as long as you need it, then return it.

And there aren’t many assets you can’t acquire through leasing or hire purchase.

Could affect your credit report

Leasing and hire purchase providers will conduct credit checks when you apply for finance. This may have an impact on your credit report.

Charges

If you want to secure the asset at the end of the contract, you may have to pay a fee to do so.

Losing the asset

If you default on your payments, the lender may recover the asset. This could harm your credit rating.

Here are some important questions you'll need to consider before proceeding with leasing or hire purchase:

  • What are the fixed payments?
  • How long is the contract?
  • What happens at the end of the contract?
  • Are there options for a secondary rental period?
  • Is this the best option for my business?
  • Can I afford the monthly repayments/rentals or does the contract put too much stress on my working capital?
  • Do I have a good credit rating?
  • Do I want to own the asset at the end of the contract? If so, will I have to pay a fee?
  • Am I responsible for maintaining the asset, or is the lease provider?
  • Are there tax benefits I or the finance provider could make use of when acquiring the asset?

You can search for leasing and hire purchase providers online.

Before you apply, use this checklist to help decide whether these types of finance are suitable for your business.

Other finance options

Click here to visit Angel Investment
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Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

Angel Investment

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Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.

You're looking for

Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

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Angel Investment
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Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
About your business
Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
Sectors All sectors, but especially suitable for companies with a scalable business proposition
Regions All regions
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Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.

Private Equity

Investors like

Mature, growing and profitable business with an annual turnover typically between £10m and £100m.

You're looking for

Finance in the region of £10m to £50m to shake up your business through management buy-outs, acquisition, product development or entry into new markets.

Find out more about Private Equity
Private Equity
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Private Equity
Purpose of financessss Change in shareholder ownership, management buy-outs, acquisition, product development, entry into new markets
Amount of finance £10m-£50m
Duration of finance 3-5 years
Cost of finance Monitoring and director fees; loan note interest
Time of finance Minimum of 3 months but can take up to a year
About your business
Business stage Mature and growing; profitable
Annual turnover £10m-£100m
Sectors All sectors
Regions All
Click here to visit Leasing & Hire Purchase
Debt
A business can use Leasing and Hire Purchase to buy specific assets, like vehicles, machinery or other equipment.

Leasing & Hire Purchase

Providers like

Businesses at all stages who can demonstrate their ability to fund payments.

You're looking to

Get finance to acquire equipment, machinery and vehicles without putting a strain on your working capital.

Find out more about Leasing & Hire Purchase
Leasing & Hire Purchase
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
About your business
Business stage Early stage to established with a trading history
Annual turnover Any
Sectors Any
Regions Any

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