Equipment
Finance
Equipment
Finance is a type of finance facility offered by finance providers
to business customers looking to acquire equipment for their
business and pay for it over an agreed period rather than purchasing
the equipment outright. Equipment finance is typically underwritten
as a lease rental, which is very popular amongst businesses
due to the fact that it offers 100% tax relief on each of the
rentals paid. Depending on what bracket corporation tax your
business falls into, this in real terms can equate to a worthwhile
overall percentage relief on the actual lease rentals themselves
- check with your accountant for specific benefits.
Typical
equipment businesses require equipment finance for include office
furniture, catering equipment, telecoms equipment, IT equipment,
vehicle tracking equipment, medical equipment and laptops to
name just a few examples of equipment generally financed, and
various funders will have a preference list on the type of equipment
they are happy to consider financing. Equipment Finance allows
a business to budget a monthly or quarterly cost for their equipment,
being a fixed cost product the monthly lease rentals typically
do not change and are fixed payments throughout the duration
of the lease itself. Equipment Finance is generally offered
to businesses on a Lease Rental basis, therefore the business
doesn't own the equipment as it is purely renting the equipment
from the finance house (and getting the associated tax benefits
of renting equipment) who has paid the original equipment supplier
and bought the title to the equipment.
With most equipment finance agreements, it is the responsibility
of the equipment supplier to offer warranty and back-up for
the product, leaving the finance house to act purely as the
financier of the equipment itself. Equipment finance also allows
a business to keep other lines of finance free, such as commercial
loans, overdrafts, etc from the bank to use at a later date
if required. Equipment finance agreements are typically underwritten
on the strength of a company's balance sheet. The underwriters
normally look for three to four times cover based on the net
worth or shareholders funds of the busines requiring funding,
other factors the underwriters consider will be the length of
time the business has been trading, previous and current credit
history, and the general performance of the business itself.
