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Funding New Assets – Asset Finance

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Every business will from time to time need to acquire new plant
and machinery. These might be very expensive items, like new
printing presses, manufacturing equipment or vehicles 
(warning be careful of the tax aspects of privately using the
assets), or relatively inexpensive items, such as computers or the
tools of a trade.

There are many ways a business can choose to purchase new
assets, but the now-famous words from US oil baron, John-Paul
Getty, still ring true – “If it appreciates, buy it. If
it depreciates, lease it”.

Below are a few of the more common ways a business can fund the
purchase of a new asset.

Hire purchase. Most of us will be family with hire purchase,
where the cost of the asset is spread over a set period after which
that asset will be owned by the business. Assets purchased in this
way can qualify for capital allowances claims.

Operating lease. An operating lease is essentially a rental over
a set period. Businesses benefit from the predictable monthly cost
but will never own that asset. There are many different ways to
structure an operating lease, sometimes called a finance or capital
lease, each with different tax issues to consider.

Contract hire. Contract hire is primarily reserved for vehicle
fleets and is attractive when a business owner does not wish to
worry about ongoing maintenance. Vehicles are not owned by the
business but by the finance provider .

Businesses can also use assets they own to raise additional
capital. Assets can be used as loan security or selling an asset to
a specialist asset finance house who will then lease it back to the
business for a fixed monthly fee. If the business were to default
on that loan or be unable to meet lease obligations it may lose
that asset.

Businesses are strongly recommended to take advice on the
financial and tax aspects before choosing a particular asset
finance route.  We offer a free initial consultation, where we
can discuss what you would like to achieve and the options
available. Please get in touch with James Johnson on the details
below.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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