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What is leasing?
Leasing is a form of asset finance which provides a way for you to obtain the assets you need without harming your business’ current liquidity position. It can provide your business with flexibility and is appropriate for a range of assets which means this financing solution can be used in most industries.
It is similar to hire purchase but at the end of the agreement you won’t automatically own the asset instead you can return it, upgrade it or pay it off to carry on using the asset and legally own it. Leasing allows you to acquire the asset you need for a regular affordable payment, with the option of the leasing company providing routine maintenance.
We understand that whatever your business, to be productive and reach your full potential, you are likely to require new assets along the way. Leasing allows you to hand the purchase of the asset over to a leasing provider who will purchase your behalf and you will then make fixed monthly payments to them so you can use the item on a day-to-day basis.
How will lease finance work for my business?
A leasing agreement will involve your business approaching a lease company who can purchase an asset for you which you will then lease back from them. You are likely to have to pay a deposit or initial payment to the leasing company and then pay fixed monthly instalments in order to use the asset.
Your business has use of the asset for the lease term and at the end of the rental period, you have three options depending on the terms of your agreement: return the asset to your lender for an upgrade, return the asset because you no longer require it or make a ‘balloon payment’ – repayment of outstanding sum – to become legal owner of the asset and carry on using it.
Leasing can be an effective solution in a range of situations and can be ideal for businesses that require access to equipment but do not want to take on the responsibility and expense of outright ownership. It can also be beneficial if you require assets that are expensive to purchase, depreciate in value quickly or are regularly superseded by more advanced models.
Why should I consider leasing for my business?
Leasing can work for businesses of varying sizes in a variety of sectors and we will work hard to find you a lender who can help you to achieve:
- Great for start-up businesses – The low initial cost and payments spread over a period makes it easier for start-up businesses to obtain the capital assets they need.
- Lower tax payments – Leasing costs are considered to be a trading expense, which may make it possible to deduct them out of your business’ taxable profits.
- Access to better equipment – The use of this financing method can provide your business with access to better equipment which may otherwise be too expensive for your business to purchase outright. This would allow you to gain a competitive edge and become more productive.
- Preserve your cash flow – It can be an excellent way to protect your business’ cash flow and ensure you can continue meeting day-to-day financial obligations. The fixed nature of the repayments allows for effective budgeting, planning and forecasting.
- Regular upgrades on equipment – Leasing assets allows you to trade them in for the latest model at regular intervals, ensuring you are always operating with the latest equipment.
- A way to avoid depreciation – Taking full ownership of an asset means you stand to lose money through depreciation if you wish to sell it at a later date. Leasing avoids this problem by allowing you to simply return the equipment to the lender once you have finished using it.
Are there any risks associated with lease finance?
- Non-payment will affect your credit rating – Missing payments or not paying at all can have an effect on your business’ credit rating. This could potentially impact your chances of borrowing in the future and a default is also likely to result in repossession of the asset.
- You are not the legal owner – With leasing, you will not legally own the asset unless you make the balloon payment at the end of the lease term.
- Your interest rate will reflect the risk level to the lender – If you are in a sector which is seen as a particular risk or if your business has a poor credit rating, you are likely to have a higher rate of interest than a business which is perceived to be safer.
- Early cancellation and damages – Although leasing contracts are relatively flexible, there may be some penalties for cancelling your contract early. Also, there is likely to be some clauses in your agreement which talk about damages to the asset; non-accidental damage in particular is not likely to be covered and may result in significant costs for your business.
So if you are looking to acquire an asset without denting your cash flow or having the responsibility of maintaining it, lease finance could be the right option for you. Call us now for further information or to get your free, no obligation quote.
Some of the partners we work with...
From a funders perspective, I find that the team at WF Financial Solutions, really take the time to understand the customers’ needs and wants and with their vast experience are able to match them with the correct funders. This really helps the funders to build a fast and trustworthy relationship to ensure any facilities are provided in a timely manner.
- Wayne Spratt, Business Development Manager, Bibby Factors Yorkshire
Why choose us?
WF Financial Solutions is an independent broker of invoice, asset and trade financing solutions with links to lenders of all sizes and specialties. WF Financial Solutions has helped many clients through a range of lenders and their varying services and we are proud to offer advisory and introductory services to finance providers that suit your needs.
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