Medium Term

Hire purchase: It involves purchasing an asset paying for it over a period of time. Usually a percentage of the price is paid as down payment and the rest is paid in installments for the period of time agreed upon. The business has to pay an interest on these installments.

Leasing: Leasing involves using an asset, but the ownership does not pass to the user. Business can lease a building or machinery and a periodic payment is made as rent, till the time the business uses the assets. The business does not need to purchase the asset.

Advantage

Disadvantage

  • The business can benefit from the asset without purchasing it.
  • Usually the maintenance of the asset is done by the leasing firm.
  • The total cost of leasing may end up higher than the purchasing of asset

Medium term bank loan: A bank loan for 1 year to 5 years.

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