Expensive equipment (e.g. delivery trucks) can be purchased on hire purchase.
The final overall cost of the asset will be higher than if the item was bought for cash.
No security is required for purchasing, but by the time the item is fully paid for and ownership passes to the firm, it may have become obsolete or depreciated considerably in value.
Leasing Leasing means renting an asset from a specialist leasing company. When the lease is up, the item is returned to the lessee (leaseholder). It is often used to finance new vehicles for a business.
Amount Cost Risk
The use of expensive assets can be acquired quickly by a business.
Leasing can be expensive and the business never owns the asset.
Since the business doesn’t own the asset, risk is reduced as it does not have to worry about long-term depreciation in value of the asset.
LO 2.11
10. What are the main sources of long-term business finance?
Grants A grant is essentially free funding provided to an enterprise. There aren’t any repayments involved and no interest is charged. The main providers of grants to businesses are Local Enterprise Offices for small businesses, Enterprise Ireland for larger enterprises and EU funding which is available for investment and innovation in business.
Amount Cost Risk 246 Can be large or small.
No financial cost. However, there are normally conditions attached to how the money can be used.
