At Johnston Financial Solutions, we see a variety of reasons why business wish to access finance. Typically, the main reasons include:

  • to purchase new machinery to improve its workplace productivity
  • to expand the workforce and hire
  • to purchase or expand a physical premises

When it comes to purchasing machinery or new assets for the business, there are two types of finance options that a business can explore.

Hire Purchase

Hire Purchase (HP) is a financing arrangement that allows a business to acquire an asset without paying the full cost upfront. Typically, the buyer will pay an initial deposit, followed by a series of regular payments over an agreed period. Once the asset has been fully paid off, the lender will transfer ownership to the buyer.

Pros of Hire Purchase:

  • One off deposit: Initial deposit (say 10% plus VAT) is lower than the total cost of the asset.
  • Flexible terms: Instalment payments can be agreed at the initial stages to make purchasing the asset affordable for the buyer

Cons of Hire Purchase:

  • Finance costs: There will be a relatively small cost associated with the finance. This is something to factor in whenever considering hire purchase finance. However, this may provide access to equipment that wouldn’t otherwise be available or help protect cashflow.
  • Ownership delay: Ownership will not be until the asset is fully paid off and the buyer may not be able to fully utilize tax benefits until the contract is complete.

Asset Finance

Asset financing is typically used by businesses, to borrow against assets they currently own. Accounts receivable, inventory, machinery, or physical premises may be offered as collateral on a loan. Asset Finance is often seen as a ‘short-term’ financing option when a business may need help with cash flow quickly

Pros of Asset Finance:

  • Preservation of capital: Asset Finance allows businesses to preserve their capital for other essential operations.
  • Short-term option: typically, asset financing could be a short-term option and may not be viable for a business that requires a longer-term solution

Cons of Asset Finance:

  • Finance Costs: Similar to Hire Purchase, the business will need to consider cost implications of the finance and the benefit of the support.


How can I best decide whether to use Hire Purchase or Asset financing?

Whenever making the decision to go with Hire Purchasing financing or asset financing, it’s best to consider what would you like the final outcome of the purchasing agreement to be. Would you like to have full ownership of the asset? Or are you seeking a short-term option for assisting with cashflow or seeking to purchase new equipment for your business?

Our recommendation before making any decision around finance would be to first speak to a Commercial Credit Broker. A credit broker will be able to provide more information on the different types of financing that will be available for your business and can support you with your application for securing finance.

For a free, no obligation chat about your business scenario with us, book a call here.

It would be useful to have these items available before or on the call.

  1. Details of the asset
    • Make, model and year of manufacture of the asset preferably on an invoice
  2. Two years business accounts
  3. Six months business bank statements


About Johnston Financial Solutions Limited

Johnston Financial Solutions is an independent credit broker of commercial finance in Northern Ireland. Improving access to finance from a diverse range of alternative funders such as mainstream banks, challenger banks, pension funders, and peer-to-peer lenders.