Where ownership is not required, finance leasing works well for a broad spread of business assets including machinery and vehicles.
Key features & benefits:
- Preserves working capital – offers the obvious cash flow benefits of paying in instalments.
- Initial deposits can be as low as one repayment/rental down.
- Flexible – repayments/rentals can be structured according to your anticipated trading cash flow.
- Tax efficient – the repayments/rentals can normally be offset against taxable profits and the rentals can be offset against VAT for the life of the agreement.
- Cost-effective – the Lessor, as owner of the asset, claims the writing down allowances and passes them on to you in the form of lower repayments/rentals.
- At the end of the lease you can continue renting the equipment by paying annual secondary repayments/rentals or sell the goods to a third party and retain up to 99% of the sale proceeds.
This is a rental agreement which can be used to finance a broad spread of business assets but is particularly effective for financing larger assets e.g. refuse vehicles, large industrial plant, ships, planes etc. The Lessor builds in a residual value to reduce the rentals, thus helping cash flow and making ‘off-balance sheet’ funding possible (subject to current IFRS and GAAP Accounting Rules).
Key features and benefits:
As Leasing, plus
- Competitively priced – the Lessor or manufacturer takes the risk in the residual value of the equipment and factors this into the rental, bringing down the periodic cost to you.
- Asset can be treated as ‘off-balance sheet’ (subject to your auditors’ approval).
- Flexible – at the end of the term, you can return the asset or extend the period. Either way, you do not carry the problem of disposal of the equipment.