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The Advantages of a Finance Lease

The Advantages of a Finance Lease

Finance Leasing has proved popular as a way for businesses to resolve their business asset requirements without having to purchase the assets outright.

Businesses find that finance leasing can yield better returns on capital and helps to maintain a good level of cash flow within the business to meet other obligations.

What is finance leasing?

Essentially, finance leasing enables your business to acquire the assets necessary to maintain your business without actually needing to buy those assets outright.

A finance lease agreement between the owner of the asset (the lessor) and the user of the asset (the lessee) allows the lessee use of the asset in exchange for making regular monthly lease rentals to the lessor. This type of agreement can be beneficial to the lessee for tax reasons with the rentals paid being offset against taxable profit, whilst ensuring that the cash, that would have otherwise been used to purchase the asset outright, is retained in the business.

What happens at the end of the finance lease?

When the finance lease terminates, the asset is normally returned to the lessor, unless there is an agreement in place within the lease contract that allows for alternative options.

There are several options open to the lessee after the lease agreement has been terminated. These include:

  • The lease can be renewed by the lessor on a rolling contract or for a defined period
  • The asset can be returned to the lessor
  • The asset can be returned to the lessor and then sold to a third party buyer

Finance leasing benefits

There are considerable benefits to taking out a finance lease, whcih include:

  • It offers flexibility in terms of length of agreement, rental repayment profile and end of lease options.
  • Unlike outright purchase you will retain much needed cash within your business to meet ongoing and exceptional running costs.
  • By retaining the cash in your business you will be able to act quickly in meeting sudden cash requirements to secure stock, staff and resources.
  • If your business has a seasonal cash flow such as the farming industry, then lease rentals too can be tailored to match that seasonality.
  • With minimal outlay required, often just 3 or 6 monthly rentals, leasing enables you to turn over your assets more frequently. This will ensure you are using the most up to date and efficient assets to run your business.
  • With leasing, ownership of the asset remains with the lessor, therefore your liability is only to pay the rentals.
  • More effective financial planning. The lease repayment profile gives you confidence in being able to budget for the lifetime of the asset.
  • Some types of leasing can be treated off balance sheet so reducing your debt position. This can be important if you need to meet debt-to-equity ratios.
  • Minimal outlays and repayment profiles that are matched to the life of the asset optimise your cash position so allowing for investment in business growth activities such as a relocation or expansion. 
  • Leasing avoids the potential for retaining assets beyond their use working life, which could otherwise result in you owning outdated, inefficient or redundant assets.
  • Using the latest technology, vehicles or other assets will ensure you remain competitive by keeping your costs low.

Asset Funder is here to help! We can quickly give you a decision on a finance Lease.

The business sectors we cover?

Our sectors include manufacturing & engineering, agriculture, prestige cars, commercial vehicles, construction, demolition, technology and green energy.

We can offer finance leasing on both new and used assets. Where you already own the asset we can offer you a sale and leaseback agreement where we will buy the asset from you and lease it back on favourable terms. Our finance lease options are simple to apply for.

We offer:

  • A quick application
  • Fast seamless process
  • No hidden charges
  • Flexible repayment structures
  • Competitive rates from our panel of leading lenders ·

Do not hesitate to contact our friendly team to discuss your lease financing needs.

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