Finance agreements can look straightforward on the surface, but the details matter. Before you sign, here are five questions you should always ask — and that any good broker should be able to answer clearly.
1. What is the total cost of the agreement, not just the monthly payment?
Monthly repayments are easy to compare, but the total amount repayable tells you the true cost of the finance. Add up all the monthly payments plus any fees, deposit, or balloon payment at the end. That's the real number to weigh against the cost of buying outright or using cash.
2. Do I own the asset at the end, or not?
This depends on whether you have hire purchase (you own it) or a finance lease (the lender retains ownership). Both can work well, but make sure you know which one you have and whether it matches what you actually want. If you want to keep the machine long-term, hire purchase is usually the right structure.
3. What are the early settlement terms?
If your business circumstances change and you want to pay off the agreement early, what does that cost? Some agreements have significant early repayment charges; others are more flexible. For larger or longer-term agreements, this is worth understanding upfront.
4. Is there a personal guarantee, and what does it cover?
Most business finance — particularly unsecured lending — will require a personal guarantee from the director(s). This means you're personally liable if the business can't repay. Make sure you understand the scope of any personal guarantee before you sign.
5. Is the commission disclosed?
Brokers earn commission from lenders when a deal completes. FCA regulations require this to be disclosed. If a broker isn't transparent about how they're paid, that's a red flag. At GDFS, we always disclose our commission and explain how it works.
If you're not sure about any aspect of a finance agreement, speak to us before you sign. We're happy to review the terms and explain what they mean in plain English.