Business Library

Finance your business equipment

All businesses, at some time or other require equipment, be it a vehicle for deliveries, a computer system, or equipment for a specialised industry, such as lathes or printing presses. Often some form of finance may be required to acquire this equipment. Described below are some of the most popular ways of financing equipment and the potential advantages that could be available.

Operating Lease:

This offers the opportunity to acquire equipment without the risk of ownership whilst retaining 90% of the re-sale profit.

Advantages of choosing an operating lease include:

Lower rentals
An off balance sheet asset which does not affect the gearing ratio of your business
Use without ownership
Other lines of credit are preserved
Tax relief for rentals could be available
VAT payment is made upfront and subsequent payments are avoided

Finance Lease:

This offers you the use of equipment without the risk of ownership. In addition, at the end of the lease a percentage of the sales proceeds may be available as a rental rebate.

Advantages of finance leasing include:

Low initial outlay
Easy to arrange
A balance sheet asset
Use without ownership
Tax relief for rentals
Percentage of the sales proceeds available as a rental rebate
Preserves other lines of credit
Can hand the equipment back at the end of the lease term
VAT is payable on rentals

Hire Purchase:

This offers an excellent way to spread the cost of acquiring equipment.

Advantages of hire purchase include:

Fixed or variable rate interest
Writing down allowances
Interest can be tax allowable
Agreed fixed term
Can offer payment 'holidays' or 'stepped' payments to enable the equipment to start generating profit
Ownership of the asset at the end of the Hire Purchase term
Can be tailored depending on your individual requirements e.g. balloon payments

Action Checklist:

Once you have decided upon the type of equipment you require for your business, you should consult a professional advisor on the most suitable method of funding for your business
Make sure you consider the tax implications of your decision
Enquire about special offer terms available from suppliers for certain methods of payment
Get an online quote now by clicking here.

This is a guide. It may be helpful for you to speak to an advisor in leasing and asset finance. E&OE