Equipment
Leasing
Equipment
Leasing is a popular form 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 leasing 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 leasing 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 leasing 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 leasing 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 leasing 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 leasing 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 leasing 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.
