Anglo Scottish Asset Finance look at why companies turn to business equipment leasing and share their top tips.
Business equipment leasing can help in business expansion, fulfil a major new contract or business opportunity or simply to replace existing equipment that has become obsolete or inefficient.
This method of business equipment financing has grown because of its simplicity and flexibility for capital or commercial equipment and a whole range of other asset types.
But what are the main reasons for making this decision in the first place and why opt to lease rather than buy business equipment?
Here are 10 reasons for choosing business equipment leasing:
Straightforward and flexible. The simplicity and flexibility of new business equipment leasing means that it’s suitable for all types of business. Start-ups or existing businesses needing new equipment and major companies investing in major new plant and machinery can all benefit.
No major drain on cashflow. As the business doesn’t have to pay the full cost of the asset up front, it doesn’t have to use up vital working capital or borrow the money in the form of an expensive bank loan.
It’s sustainable. New business equipment financing can provide a regular payment plan that minimises impact on working capital and cash flow.
Budgeting is easy. The business pays for the asset over the fixed period of time that it uses it, which helps budget accurately over its projected life. As interest rates on monthly rental costs are usually fixed, it is also easier to forecast cashflow.
Capital allowance benefit. Although the capital allowances that the equipment attracts usually remain with the finance provider, on ‘long funding leases’ – finance leases over seven years and sometimes over five years – and some long operating leases, the business itself can claim capital allowances on the cost of the assets.
Tax advantages. With equipment leasing, the business can usually deduct the full cost of lease rentals from its taxable income, helping reduce profits for tax purposes. Also, as VAT-registered businesses, most firms are able to reclaim the VAT they pay on their lease rentals over the life of the asset.
Better equipment. By opting for leasing rather than outright purchase of the business equipment and spreading the payments, you can possibly afford to buy better equipment than you thought.
Greater security. As the equipment itself can be used as security for the loan, equipment financing is a very accessible form of funding. Businesses are able to borrow the required sum to acquire the asset more readily, as the lender knows that the asset provides them with security.
Talk to the experts
As with any form of finance lending, it is always advisable that businesses seek expert advice. Contact Anglo Scottish Asset Finance today.