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Popular Reasons UK Businesses Choose To Finance Their New Equipment
| Guest post by: Al Shea |
Article Overview: This article runs through the reasons why asset finance and leasing is proving more and more popular in the United Kingdom, and its popularity continues to grow year-on-year. Especially in the current financial climate, many businesses are choosing to preserve the cash they have at the bank and instead looking for new ways to still get the business equipment they need without it affecting their cashflow. Business finance is a perfect answer, and here we run through why.
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Free Download - The Best Finance Comparison Sites And Reasons Why By Al Shea |
Popular Reasons UK Businesses Choose To Finance Their New Equipment
You can finance most types of business asset - Choosing a reputable funder means they can offer you a fully managed solution for many different business assets, from IT, software and hardware, to garage equipment, catering equipment and heavy plant machinery
VAT savings - your business can normally claim the rental VAT for non-vehicle assets and vehicles used solely on company business. You can also normally claim half the rental VAT for vehicles used for private purposes
Low monthly payments to suit your budget - The funder owns the asset and leases it to you for an affordable monthly cost to suit your budget, keeping your costs down and making it easier to budget
From one asset to many - A good funder can work with every kind of business, from sole traders to large corporate clients - whether it's one phone or a complete telecoms network
One comprehensive monthly payment - maintenance and additional warranty contracts can be included within the lease agreement.
More Flexibility - as the customer, once you have reached the end of your finance agreement you may sell, enter into a secondary rental period or write off the asset.
No disposal costs - as the funder owns the title to the asset, they will typically dispose of it at the end or the agreement on behalf of the customer, saving you time and resources.
Different Types of Asset Finance Explained:
Finance Lease/Lease Rental
The title of the asset being leased is retained by the lessor and the leasing payments are calculated based on the total invoice value of the asset. Lease rental is the most common form of leasing when it comes to financing equipment for businesses. There may be an option to extend the rental period at the end of the term into a secondary period, whereby the lessee continues to rent the equipment from the lessor. In some circumstances title of the equipment may also be sold to the lessee for a nominal sum via a third party.
Contract/Hire Purchase/Lease Purchase
Contract purchase is the commercial equivalent of hire purchase. The asset is owned by the "hiring" company until the final payment is made at the end of the term at which point title passes to them.
Operating Lease
The asset title belongs to the lessor who rents the asset to the lessee over an agreed period of time, which is typically between 2-5 years. The lessor will look at the residual value of the asset and take this into consideration when calculating the lease payments to the lessee. As the lessor will typically look to sell or rent the asset again after the lease runs its full course because the lessor knows it still has a residual value attached to it, they can therefore reduce the lease payments to the lessee, safe in the knowledge that the lessor can realise additional profits once the lease finishes. Operating leases are often used by government bodies, councils, etc for larger core equipment and assets. Often the lessee will look to continue the rental of the asset after the initial fixed term reaches an end.
Contract Hire
Can be viewed as another form of operating lease (commonly found in use with vehicles) which includes many service and warranty features like maintenance, replacement during repair, complete vehicle management, tyres, etc. As with an operating lease, the lessor owns title to the asset for the whole duration and the rental calculation is based on a residual value of the asset over an agreed period of time, taking into consideration natural depreciation of the asset. Use the below form and we'll give you a quote based on what best suits your business requirements.
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About the Author: Al Shea RSS for Al's articles - Visit Al's website Click here to visit Al's website   Lease Rental versus Outright Purchase A Worked Example UK Asset Finance Options Explained How To Choose the Right Finance For Your UK Business Why Should You Offer a Finance Scheme To Your Customers Quick Guide Financing a Subway Franchise in the United Kingdom The difference in underwriting criteria between vehicle finance and asset finance in the UK |
Related Forum Posts
Re: Finance is the primary requirement of business
- [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn]
Good point.
I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business
- Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Re: 10 Reasons Who Startups Fail & Book Recommendations
- Great post,but please edit the headline. I presume it is "10 Reasons Why Startups Fail & Book Recommendation
Which kind of industries are you interested in?
- Ecological or E-business or Investment or Finance or Management or Non-Profit or Retailer or others.
Equipment leasing
- Equipment leasing has many benefits, such as tax benefits, conserving money and always having up to date equipment to stay competative to name a few. Obviously, it's partially dependent upon what type of business you have as to whether you will benefit more than someone else but...
Do you think it's worth leasing your equipment rather than purchasing it?
Can you think of any other reasons you can benefit from it or any reasons this is not a good idea?
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