Finance Leases for UK Businesses
For businesses looking to get access to equipment, vehicles or machinery, a finance lease is a form of asset finance that can be used to spread the payments for the equipment over an agreed period of time.
Finance leases represent a valuable facility for businesses in the UK that need access to expensive assets, but do not want the risks associated with owning the item.
With a finance lease agreement, the asset in question remains the property of the finance company.
A finance lease could be right for your business if you’re focusing on maintaining a consistent cash flow. Find out more about finance lease agreements below or contact our team to find out more.
Need help? Call us on 0191 410 4776
What is a finance lease?
A finance lease is a form of asset finance agreement between a lessor (a funder or a finance company) and a lessee (your business), wherein you gain access to business equipment for an agreed monthly fee.
Finance leases differ from other forms of asset finance such as hire purchase in that your business will never actually own the asset – it remains the property of the lessor.
A business finance lease is, therefore, a great option if you require access to expensive machinery, vehicles or equipment, but do not wish to purchase them outright.
There are two main forms of finance lease agreements – a residual value lease or a fully amortised lease.
Residual value lease
In a residual value lease, the diminishing value of the asset is reflected in your monthly rental payments, with a final balloon payment covering the estimated residual value at the end of the contract.
At the end of the finance lease period, you will usually be given the option to extend the lease beyond the primary period or to return the asset. If you don’t require an extension on the finance lease, the asset will normally be returned to be sold on.
Alternatively, you could sell the asset to a third party on behalf of the lessor. You may be given a rebate of rentals equating to a part of the sales proceeds, depending on the terms outlined in the original finance lease agreement.
If the sale price of the asset exceeds the predetermined balloon payment, then the lessor will usually refund a percentage of the proceeds to you, the customer. If the price is below the balloon payment, then you will be liable to cover any shortfall.
Fully amortised lease
With a fully amortised lease, you pay back the entire capital cost of the vehicle, plus charges, as a monthly fee over the contract period.
In both forms of business finance lease agreement, you, the customer, are responsible for the maintenance of the asset and any servicing that may be required.
You would also be accountable for any damage that occurred to the asset, so it’s important to take out an insurance policy covering all potential damages that could arise over the lease period. Separate maintenance contracts may be available with the asset, and we’re always happy to discuss this.
What are the advantages of a finance lease?
Finance leases offer a range of benefits for businesses of all shapes and sizes. However, they can be particularly useful for smaller businesses or start-ups that lack the capital to buy expensive machinery outright.
Even if your business does have the capability to pay for your required asset in one go, a finance lease may still be a beneficial arrangement. Spreading the cost of a significant standalone investment could provide a competitive advantage, leaving cash flow freed up for sustained growth.
Maintaining a stable cash flow also makes budgeting easier for the rest of the year and allows your business to retain working capital in the event of unforeseen issues occurring in other areas of the organisation.
In many cases, your finance lease payments can be be considered 100% tax-deductible, so opting for a finance lease could also carry tax benefits. Be sure to consult with your accountant to confirm whether your business is eligible
Why choose a finance lease
A finance lease offers a number of benefits in comparison to other forms of asset finance. The fact that your business will not own the asset provides increased flexibility and a range of options once the arrangement term is complete.
We can typically offer a wider range of lending terms with a finance lease as opposed to an operating lease – the upfront cost is minimal, and we may be able to offer reduced monthly payments.
Finance leases are a great option for businesses working in a number of sectors, but are particularly helpful for businesses to access assets that form a key part of their supply chain.
Securing your finance lease
When you opt for a business finance lease agreement from Anglo Scottish, we make your life easy. Thanks to our unique portfolio of over 70 varied funding partners, we can offer a wider range of lending terms than traditional institutions like the big banks.
Once you’ve decided on the asset you’d like to finance, get in touch. Our expert team will work with you to get to know your business and decide which form of finance arrangement is right for you.
Then, we’ll reach out to our panel of lenders on your behalf and secure the best terms possible for your business’ specific situation and long-term goals.
Once you’ve signed and we’ve done a final check, you can access the finance you need! It’s as easy as that.
HOW IT WORKS
Five steps to easy finance. Find out how we get you your finance lease below.
Decide on the asset you need to help your business grow
Talk to us, tell us about your business and the asset you wish to acquire.
We will reach out to our panel of lenders on your behalf to gain approval.
Sign your document, once approved we’ll send you your documents to sign. After which we will transfer payment to your asset supplier
We’ll do a final check to make sure everything is running smoothly, and you can start reaping the benefits of your new asset.
A finance lease can be a hugely important and helpful facility for businesses of all sizes. The flexibility provided by a finance lease arrangement means that any business can enjoy the benefits of spreading the cost of their investment.
To find out which is right for you, get in touch today! Contact our team to discuss your options or simply have an initial chat. We look forward to hearing from you!
Need help? Call us on 0191 410 4776