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Hire purchase in Singapore allows your business to purchase equipment without initial capital outlay. A hire purchase plan usually starts with an initial down payment, followed by monthly payments for a fixed period. After all payment terms are fulfilled, you have the option to own the asset in Singapore.
Many companies in Singapore need access to expensive equipment in order for their businesses operations to run smoothly. However, purchasing equipment in Singapore can be a daunting, not to mention pricey affair. Other options include leasing the equipment you need or acquiring it through hire purchase-but what does that entail?
If you are looking for a long term and cost-effective solution for your business needs, leasing and hire purchase are some great alternatives to consider While both provide you with long-term usage of essential equipment for your business, they have very different implications on your finances and needs.
Hire Purchase is a business financing solution where your business agrees to acquire an asset by paying an initial instalment and repays outstanding balance price of the asset with interest over a stipulated period of time. Usually, an inital downpayment is required followed by monthly payments for the fixed period. After all repayment terms are fulfilled at end of the rental period, the hirer has the option to take over ownership of the asset. We further expound on the benefits of Hire Purchase below.
As a business owner, cash flow distribution is an important concern. To acquire equipment for your business needs, making a large sum purchase may not be the wisest option. With a low initial down payment, leasing is a more cost-effective option that allows you to acquire equipment. This frees up cash flow for other areas of priority such as business expansion.
A benefit of equipment leasing is freeing up your lines of credit. From office automation to industrial machines, equipment is essential for many businesses. There are a number of financing arrangements that allow a business to acquire equipment, such as term loans. However, using a term loan to purchase equipment may take up a sizeable proportion of your loan and reduces your line of credit. Equipment leasing frees up your line of credit to obtain additional financing. In addition, equipment leasing uses the equipment itself as collateral. Therefore, any other collateral your business owns can be used to secure additional financing.
For some industries, businesses are at a big disadvantage if your equipment becomes obsolete. Apart from the technical competitive edge, equipment is also an extension of your brand and contributes to your customer brand perception. While it is impractical to purchase new equipment every year or two, leasing allows you to constantly equip your company with cutting edge equipment.
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