Securing the funding you need to grow your farming business can sometimes be difficult and with the vast amount of options available it can also feel overwhelming.

There are different finance products available to suit different needs, of which we’ll cover HP, Lease and Refinance and how to determine which product is right to help grow your farming business.

Hire Purchase (HP)

Hire Purchase (HP) is a simple way to buy an asset and spread the cost over an agreed payment term, it is best for large pieces of equipment or machinery.

The biggest differentiator of HP compared to other finance products, is that at the end of the term, you’ll regain full ownership of the asset.

Why choose HP?

  • Defer VAT
  • Schedule payments to match the seasonality of the businesses cash flow
  • Increase payments overtime to match company growth
  • Balloon payments
  • Low or zero deposits
  • Potential to offset interest and charges against tax

Leasing

A finance lease works as a rental agreement. The lender buys the asset that you need and rents it to you over the duration of the lease contract.

You would typically choose to lease if you don’t need to own the asset.

At the end of the contract you can choose to either continue renting, replace it with new equipment or sell or return the asset.

Why choose leasing?

  • Match rental amount with cash flow
  • Choose what to do with the asset at the end of the rental period
  • VAT may be reclaimed on monthly payments
  • Usually repayments can be offset against pre-tax profit

Refinance

Refinancing is a solution that enables you to raise capital for your business against the assets your company already owns.

The funds you raise through refinance can be used for a wide variety of purposes such as; paying unplanned bills, inject working capital, buy equipment that isn’t suitable for asset finance or even to close an acquisition.

Why choose refinancing?

  • It provides flexibility
  • It can be used for a variety of purposes
  • Choose to overpay at times when your business is thriving
  • Increase payments overtime to match company growth

How to choose the right product for your business

What finance product you choose depends on what you and your business need.

Do you want to own the asset at the end? HP.

If owning the asset isn’t a requirement, leasing.

Do you need an injection of cash to grow your business? Refinance.

Final thoughts

Understanding the finance options available to you and your business can help propel you in the right direction. Utilising the different products can help you manage cash flow, offset against pre-tax profits or inject cash into your business.

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About the author:

Amy Rogerson is Head of Agriculture at Amplo Agricultural Finance, a commercial Finance broker based in Cheshire who service the whole of the UK’s Agricultural market. Facilitating finance options for Machinery and Equipment, to Renewable Energy, Diversification projects and more. To connect with Amy on LinkedIn, click here.

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