If you want to upgrade your equipment but are worried about the implications on cash flow, then leasing is probably your best option.
But if you’ve never leased equipment (or anything else for that matter) before, you might be a little confused, or sceptical even, about how it all works.
We’re here to point out that equipment leasing is nothing to be scared of – in fact, for many SMEs, it’s what enables them to grow, minus the risk that comes with emptying the company accounts to fund the extra equipment that’s required.
So, if you’re unable to keep up with increasing demand, you’re anticipating an increased demand, or you just want to provide a better product/service to your existing customers, you really need to read on…
What are you signing up to?
It all depends on the type of agreement you opt to sign. For example, if you sign a finance lease, the finance company will buy the equipment you need and lease it to you over an agreed period of time.
The upsides of a finance lease are that there are no major upfront costs and rental payments can be tailored to match your cash flow. The flexibility of the payment structure – coupled with the fact interest rates are fixed for the duration of the contract – make finance lease agreements a popular option if you have to meticulously manage your cash flow.
Equipment leasing is even an option as an afterthought. A sale and leaseback agreement is when a finance company buys a recently purchased piece of equipment from you, then leases it back to you over a set period of time. This is a great option if you find that a new purchase has put a squeeze on your finances, or you need to inject some capital back into the business because, for example, an unexpected cost has come your way.
There are a number of other leasing solutions that may be available to you, including hire purchase (there’s an option to buy the asset at the end of the agreement) and seasonal lease (different rental amounts are set to align with seasonal trading periods).
What assets and equipment can be leased?
This time it depends on the finance provider and their risk appetite. Some might shy away from assets with a high-purchase price, deeming them too risky – in theory, the higher the purchase price, the more likely a business will default on their payments. Meanwhile, some providers don’t have the funds to be able to offer all types of assets. So it’s important you do your research on the different finance providers.
Shire Leasing has the appetite to fund almost anything business-related, whether it be ‘hard assets’ such as plant machinery, or ‘soft assets’ such as IT software. With an own book value of over £115m, and relationships with many funders, we have the ability to fund even the most unique business assets.
What if you have enough money in the bank?
Ultimately, you know your company’s financial situation better than anyone else, so only you can decide whether to buy an asset outright or go down the route of equipment leasing.
Also, by leasing equipment, you don’t have to worry about it depreciating in value – you simply hand it back at the end of the agreement.
To find out more or to discuss your finance options further, give Shire Leasing a call today on 01827 302 066.
