Medium-term funds

It is usually accepted that medium-term finance is for a period of one to five years.

1. Hire purchase Under a hire purchase a)___ goods are hired to the user who has the option to purchase them at the end of the hiring period. The ownership of the good remains with the b)___. The funds for hire purchase are provided by specialized financial companies known as finance houses. The usual practice is for the finance company to give the full purchase price to the seller of the good and negotiate repayment c)___ with the buyer. Both the seller and the buyer d)___ the seller because the availability of hire purchase can e)___ buyers; the buyers because the use of the good is immediately available, and not dependent on the accumulation of the necessary capital.

2 Leasing and hiring At first sight leasing and hiring appear to be different terms used to describe the f)___ situation, namely that a business does not own an item of capital equipment but pays to use it for g)___ period of time. This definition describes hiring. A business will lease equipment that it needs for a longer period of time. Under a leasing agreement a finance company will purchase a specific item of equipment for use by a business. The equipment h)___ the property of the finance company but the business has the sole use of it for which it pays an agreed rent. The agreement may be for a given period of time or for the life of the equipment. The terms of each agreement will vary. Specialized equipment might have a maintenance clause. The company leasing it will i)___ maintenance to avoid problems arising from inexpert handling. Where the technology to maintain a piece of equipment is generally available maintenance is more likely to be the responsibility of the j)___, that is the business leasing the equipment.