10 Points to consider before signing a finance agreement

[Mike Boss]

We have often seen clients coming back to us for funding, having been tempted by offers from other companies, which aren’t quite all they seem.



Therefore, we have put together a list of 10 basic tips that should always be considered:-

1. When comparing quotes from different lenders, always ensure the payment profile is the same, ie. number of payments paid upfront, as this affects the rate greatly.

2. Always keep a record of when the first and last payments are due to be made.

3. If the agreement is a finance lease, write to the funder / broker three months before the end of the agreement confirming your end of term wishes.

4. With any finance agreement, always ask the lender to confirm the end of term title fees in writing before you sign the agreement. Make sure there are no other “Residual” or “Balloon” payments due by you

5. When comparing rates, compare the total amount of interest payable. Different lenders have different methods to calculate their published rates.

6. Due to the considerable tax benefits, leasing can work out cheaper than paying cash.

7. Always ensure the schedule of equipment matches that of the equipment you are buying.

8. Brokers can save you time and money as they have access to a number of lenders and often can obtain better rates than single customers.

9. Leasing makes it easier to keep pace with technology - Most Leases have built in upgrade paths meaning you are able to keep up with technology, without always increasing your monthly payments.

10. Always ensure that you send the funder your insurance details to avoid them adding a premium to your monthy rentals.

[Ian J]

In the factoring industry it's even easier to hide the real cost as the headline rates are the be all and end all to some people yet a factoring company with a lower headline rate with a poor record for service levels and a raft of hidden extra fees will end up costing far more than a more efficient factoring company with a slightly higher headline rate

[Funding Solutions]

Good points.

Especially point 5. Lenders and in particular the sales people will often quote you flat rates rather than APR's which can sound comparable to people outside the finance industry.

Another point I feel that should be considered is whether you as a client would wish to repay the loan early. Typically on a hire purchase agreement if you have opted for a variable rate you can do so without penalty.

A reputable broker will help you sort through the jargon and misleading headline rates to ensure you get the deal that you want. I agree that this is beneficial in asset finance, invoice finance and commercial mortgages.