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Cash Flow and Insolvency Background Information

For Owensport to purchase his fix assets he should looking init two terms of finance, medium term finance is any thing from borrow money from 1-5 years. The last term of finance is a long-term finance which borrowing money for 25 years, for example Owensport’s wants to purchase his premise by mortgage. Here are some of the following ways for Owensports to pay for his equipment. Three of them involve buying the equipment, so you can become the owner; the other do the ownership retained elsewhere the ways are.

Mortgage Most people see a mortgage as simply a long-term loan, to help buy a home or a business premise. But the word itself means any loan that’s ‘secured’ against property. With Owensports home as security, the lender is usually able to offer him a lower interest rate than he will find with other types of loan. The lender will check details of the applicant’s income, and probably ask to see some recent pay slips. If they are self employed, as Owensport is he may need to show his last 3 years’ accounts. He also will be asked about any other regular outgoings (e.g. credit cards and personal loans) so the lender

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can check that he really can afford the loan.

Some people find it difficult to prove how much they actually earn, because they’re self employed and have only started the business or been in business for a year or two. Self-certified or special status mortgages can overcome this problem. A self-certified mortgage is where you declare your earnings but the lender does not require evidence. For this to happen owensport need to put down a bigger deposit to qualify for a self-certified mortgage and meet the lenders ask.

The interest rate may be higher too. Most mortgage lenders will want to know how he has handled his financial dealings in the past. They obtain this information from credit reference agencies and from others such as employers, lenders and landlords. (This will not be done with out Owensports permission. ) Information about mortgage debts may be disclosed to credit reference agencies if Owensports: * Fallen behind with your payments, * Not made proposals that are satisfactory to the lender for repaying the debt following a formal demand.

If Owensport does fall behind his payments, because his business is not doing well and he can’t pay off the loan, the bank will the premise of him. Buying Outright Buying outright does not necessarily mean buying it with your own money, to finance it to purchase the equipment. The advantage of buying outright is that you own the asset, which will be entered in the balance sheet. This will make Owensport balance sheet stronger. The disadvantage is that it uses up a large lump of cash, maybe at a time when a company is short of funds.

Hire Purchase Hire Purchase is the traditional method of funding vehicles and assets for both businesses and private individuals. Owensport can own the asset outright at the end of the hire period. Hire purchase contains some of the advantages of the buying outright. As with the out right purchase Owensport can claim a capital allowance from the time he start use the equipment, and he will be able to take the equipment in to his balance sheet as an asset, with what you owe as a liability on the other side.

Using hire purchase also means that you are not laying out such a large sum initially, compared with the buying out right, which can be helpful with cash flow. However the payment you make will consist of capital, as well as interest parts of payments. Hire Purchase, involves the whole capital value of the vehicle (VAT included) being paid off plus interest over the chosen terms of the contract. It therefore delivers a fixed amount of equal and unchanging payments and then Owensport will own the vehicle. Hire Purchase gives some cash flow advantages over outright purchase, but not to the extent of contract hire, lease purchase.

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