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Tracy Spence
Tracy Spence
Tracy Spence's Blog

The Advantages of Asset Lease Financing

 

Lease financing has grown in popularity as a good solution to help resolve business asset requirements when purchasing assets outright may be difficult. In a lot of cases using lease financing can yield better returns on capital and can help to maintain a good level of cash flow to keep business ticking over.

 

What is lease financing? 

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

 

A 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 lease?

When the 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 usually open to the lessee after the lease agreement has been terminated. These include:

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

       

Leasing benefits

There are considerable benefits to taking out lease financing, including. 

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 for a range of business assets. 

 

What sectors do we cover?

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

We can offer 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 lease finance 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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