When you start down the road of looking for business finance, it can be a daunting task. The finance industry is full of options and avenues of gaining capital, and often the choices are very complicated.
That is one of the reasons why we set up as a dedicated equipment leasing provider 15 years ago. We know and understand the power of leasing as a finance option, and since we started we have helped over 8,000 companies benefit from leasing their equipment, rather than outright purchase or other forms of finance.
As a guide, here are 10 things you should consider when looking at equipment leasing:
1. Buy upfront or lease monthly?
If you are considering purchasing equipment, then you could always buy it outright in cash. Or you could go down the sensible route of paying for it monthly, saving yourself the huge upfront cash loss and instead managing it over a period of time.
2. Consider leasing over traditional forms of lending.
One of the problems with business finance is how hard it is to get from traditional sources. Despite government incentives to get banks lending again, it’s only materialising for a small number of companies, and rarely for new starts. That’s one of the great things about leasing from Johnson Reed, we consider all companies – including new starts – in our decisions, and we currently have a 92% acceptance rate.
3. Can you afford the monthly payments?
One thing you should always consider when taking on a leasing contract is whether you can afford the monthly payments. One of the hallmarks of a leasing contract is a fixed-term deal with fixed-rate payments. Sometimes there is an upfront deposit, however most of the time there isn’t.
4. Always consider hidden payments.
A lot of finance deals often have some form of hidden payments, usually at the end of a contract. With our contract deals, there are no hidden fees or payments for the equipment at the end of the contract.
5. Consider what you want to do at the end of your lease.
When the lease contract ends, there are flexible options about what happens to the equipment, such as keeping the kit, upgrading it (see point 6 below), or returning it.
6. Consider the upgrade benefits, if in an industry that changes often.
Certain kinds of equipment can become obsolete quickly. Take IT hardware for example, where a computer can become out-of-date within 12 months, or software which can be updated with a major release within 12 months. Often keeping up-to-date can be a challenge, but with a flexible leasing contract, you can continue to extend the deal and upgrade the equipment!
7. Consider the tax benefits of leasing
The tax benefits of using leasing can be considerable. Instead of using your business’ capital expenditure (CAPEX) for an upfront purchase, if you go with a leasing deal and use your business’ operational expenditure (OPEX), then you will usually find that the entire cost can be tax-deductible!
8. Consider intangible assets, like training
One of the most overlooked aspects of getting finance is paying for things which banks traditionally don’t finance. For example, when installing new hardware or software, staff often need to be trained at an expense to the business. Rather than forking out for this, include it in the leasing contract! The same goes for software licenses, which can also be upgraded if necessary.
9. Consider the trade-off between high-quality today or lower-quality when you can afford it.
If you are considering acquiring equipment by paying cash upfront, often your budget can limit your choices. However with leasing you aren’t constrained to that extent – you can acquire whichever piece of equipment you need, and pay it off using manageable monthly payments.
10. You aren’t alone. A lot of UK businesses are turning to leasing for help.
The National Association of Commercial Finance Brokers (NACFB) have reported that in 2013, there had been a sustained growth in the levels of leasing and asset finance used by SMEs, and it has more than doubled over the past two years. More and more businesses are realising that leasing can be a much more flexible option for their needs.
If you’re still not convinced or want to talk through your options, please give us a call on 0161 429 6949.
