Business Equipment Leasing & Asset Finance

In the world of ever changing technology most business owners agree that keeping their equipment up to date can deliver a powerful advantage over their competitors, not to mention the positive impact it has on staff morale. However, upgrading equipment is expensive. It can cut into vital capital reserves and create difficulties with cash flow.

Here is the good news. If your circumstances are suitable, there is a way you can enjoy the benefits of upgraded resources for your business and staff, whilst still preserving your hard earned capital, that is by leasing them. To discover more about leasing and find out whether or not your business could benefit, read on.

What equipment can be leased?

It’s almost quicker to list the items you can’t lease than those you can. Here at Eland Business Services Limited, we can help you arrange leasing terms for almost any piece of equipment, for periods ranging from one to seven years. We are here to help you find the best asset leasing option to suit your company's needs. Once you have set up your first lease, you can even add additional equipment to the master lease under the same basic terms and conditions later on, without a new contract.

How does it work?

As the lessee, you, or your business, would enter into a financial contract with a leasing company – the lessor – through which you gain access to assets or equipment without paying the full capital cost up front. Instead, you agree to pay a monthly rental charge and a one-off deposit which usually amounts to the equivalent of around one to six month’s rental, depending on the terms of the agreement.

This allows you to manage your cash flow more easily, since after the deposit you are paying a set amount for the asset each month. It also preserves capital since the deposit is less than the market price of the item.

Why Lease?

Here are seven ways you can benefit from leasing assets instead of buying:-

1. It can help you to preserve capital. By leasing, up front costs can be kept to a minimum and the cost of the item spread over time allowing you to pay for the asset with the income it generates rather than your hard earned capital. You should be aware that you will pay more for the item “outright” than you would if you paid cash. On the up side, you will be in the position of a cash buyer & able to negotiate a discounted price that may even cover most of that additional cost.
2. It makes cash flow easier to manage. With a flat monthly rental payment of a fixed amount at a fixed rate of interest you can manage cash flow more easily. Leasing can also offset inflation, you will be protected if interest rates rise, although, remember that you will not reap the benefits if they fall.
3. Asset based finance allows you greater choice of equipment. With the payments spread over months or years you can afford to lease items you may not have the resources to buy, outright.
4. Rental payments are fully tax deductible and can come out of your funds before they are taxed. If you make a cash purchase from your capital you are using monies you have already paid tax on. This can mean the total cost of ownership can be lower by leasing than an outright cash purchase.
5. Leasing is flexible. You can arrange an equipment loan to suit your finances with time frames to suit you and even better many lease agreements allow you to purchase or trade in the item at the end of the lease, while many others allow you to cancel early.
6. It’s easy to keep leased equipment up to date. With the right type of finance agreement, you do not have to worry about your equipment becoming obsolete, since you can return it and lease more. This is an ideal solution in high tech industries where access to the latest equipment is essential.
7. Some loans offer maintenance. In some cases, the loan will include a maintenance agreement so you won’t need to be responsible for regular checks and servicing.

In other words, a lease is about more than freeing up funds, it can allow you access to higher grade equipment than you would normally be able to purchase. Leased equipment can give you the tools to expand your business when the time is right, rather than when your capital allows you to and in some instances, it may even take the headache out of maintaining it as well as paying for it. Eland Business Services Limited can help you to find the right lender for you so you can relax in the knowledge that your business is flexible and equipped to expand and today’s fast moving world.

What are the options? Advice on the leasing types available.

Although there are many different leasing options being marketed today they are all based on six basic types. At Eland Business Services we can help you decide which type of lease best suits your needs and structure a package tailored to your specific requirements. Here are the different varieties of scheme you can choose from:-

1. Finance Lease

   This is a closed ended lease – that is for a set amount of time - with fixed rental period of anything from 1 to 7 years. The amount you pay over the leasing period covers the full value of the asset, plus finance charges. You assume all the benefits and risks of ownership but legal ownership of the asset does not pass to you until the end of the agreement. At that point, you can opt to extend at minimal cost or buy the equipment out right for a nominal transfer fee. Sometimes the asset is sold and the proceeds shared between the lessee and the finance company.

2. Lease Purchase

   This lease is similar to hire purchase. Essentially, it is set up like a finance lease but it is accepted that there is a clear intention, on the part of the lessee, to purchase the asset at the end of the lease period.

3. Operating Lease

   This is an open-ended lease – that is, there is no set timescale only an agreed minimum term. You can end the agreement at any time after the minimum rental period allowing you to upgrade the item you have leased, where applicable. This flexibility to upgrade makes an operating lease an excellent option where technological equipment is concerned. Because operating leases are usually short term agreements the payments required do not cover the full value of the asset and it is not unusual for the lessor to lease the item to a new customer or sell it when returned.

4. Balloon Lease (Residual Value)

   In a balloon lease, the monthly payments are kept low by arranging a larger final payment at the end of the leasing term. If your company is expanding rapidly a balloon lease is a good option since it will allow you to access more equipment than you would be eligible for under the terms of a finance lease.

5. Sale and Lease Back

   Used Equipment belonging to the lessee is “sold” to a lessor and then leased back. This is a useful way to raise cash but high minimum values can sometimes apply. For more information about this form of cash flow management, visit our Sale and Leaseback page.

6. UK Small Firm Loan Guarantees and Leasing

   If your business is new, this is a government scheme aimed at helping start up companies with a viable business proposal that includes the leasing of equipment. If this describes your business please get in touch with us for more details.

How much does leasing cost?

It is difficult to calculate a generic figure because each type of lease agreement is different. However, if you do plan to lease equipment here are five factors which can affect the total payment made over the time your lease agreement runs:-

1. Interest and finance charges

   Clearly, these will increase the amount you pay over the period of the lease to more than the item is actually worth and more than you would pay if you bought it in cash out right.

2. Residual values

   If you wish to buy the item at the end of the lease make sure you know what percentage of the cost you are likely to have to pay since it may vary between lessors as well as for different items leased.

3. Deposit paid

   Unless you are negotiating a balloon lease, paying a larger deposit could mean your lease will cost less in the long run. This is because you will be paying interest against a smaller proportion of the item’s value, your monthly payments will therefore be smaller and the cost of interest payments should be less, too.

4. Credit rating

   The terms of the lease available to you will depend on your credit track record.

5. Business/Industry

   Some industries or types of business may enjoy more flexibility and better credit ratings than others.

Who can lease?

We can arrange great value equipment leasing deals for a wide range of businesses and individuals including:-

• People working in the professions, accountants, solicitors and dentists.
• Not for profit organisations, public or government organisations such as schools, public sector bodies, GP's and hospitals.
• Established and profitable businesses.