Refinance vs. Hire Purchase. Which one is right for your business?

Refinance vs. Hire Purchase. Which one is right for your business?

Dealing with any form of finance can be overwhelming. Whether you’re a new or established company, figuring out the most profitable investing methods can be confusing. With so many different financial options: refinance, finance-lease, business loans, all with conflicting information, where do you even start? For this article, we’re highlighting two popular finance options, Hire Purchase and Refinance, explaining what they are, their benefits and which option might be better for you.

What is Refinance?

Also known as ‘refi’, Refinance can take the form of a personal loan, secured loan or remortgage and tends to have two essential purposes:

  1. Review the current terms of any existing loans and find a better-suited repayment solution. This can include consolidating loans into one repayment, reducing interest rates, or changing your repayment schedule.
  2. Taking valuable assets that you already own (car, property, machinery, etc.) and refinancing them. You essentially place a loan on the asset, which you pay back. But it releases essential capital from that asset, which you can invest elsewhere.

Borrowers often choose to refinance when there has been a significant change within their business or industry. For example, offering a new service, hiring more staff, a change to your credit rating, impacts on the market and interest rates, or you need to restructure your payments. No matter your situation, it’s always worth speaking with a financial broker, like Busby Finance, every six months to see if your loan terms can be revised.

What is Hire Purchase?

Hire Purchase, or ‘HP’, is where the ‘buyer’ puts down an initial payment for an asset and agrees on monthly repayments. Once the final payment has been made, the ownership of the asset transfers from the lender to the buyer. It is commonly used as a payment option for cars or home furnishing, known as a Consumer Hire Purchase, but can also be used by businesses, referred to as an Industrial or Commercial Hire Purchase.

Hire Purchase is a popular choice for businesses, such as farmers, that require specific equipment to operate but cannot afford to buy the asset outright. It also helps start-up companies who may not have the capital to purchase equipment or premises straight away. By using Hire Purchase finance, businesses can continue to operate and often generate a great ROI. Assets obtained via Hire Purchases give beneficial title to the hirer from day one, so they are classed as an asset and will be reflected on the balance sheet of the company.


Should I apply for Refinance or Hire Purchase?

When choosing a financial solution for your business, it all comes down to your current financial position and roadmap for future growth. Hire Purchase and Refinance can help companies to access essential cash flow, invest in vital areas of the business and manage their budget. By speaking with experienced brokers, such as Busby Finance, we will get to know you and your business to source the right financial support to reach your goals. For more information, contact the team today.