Asset Finance

What is leasing?

Business asset purchases can be expensive. Whether it's office equipment, computers, furniture or MOT bays, purchasing equipment for a business can have a major impact on cash or credit lines. In the past customers may have asked their bank for a small business loan or used their overdraft; however leasing has become the financing method preferred by all types of small and medium sized enterprises (SME’s).

A finance lease is a contract under which the leasing company (lessor) purchases the business asset required by the customer (lessee). The lessee then commits to repay the capital cost of the equipment together with the lessor's interest charges at a fixed rate over a fixed term (on a monthly/ quarterly/annual basis).

The lessor pays the initial VAT on the cost of the asset. The lessee pays VAT on the lease rentals payable and, provided the lessee is VAT registered, they can claim the VAT on the rentals back from HMRC.

1pm can purchase most business assets (see ‘Equipment We Finance’ section) and offer low monthly payments and simple paperwork.

1pm understands that finance is very important to new start businesses and that new start businesses find it very difficult to secure funds, however 1pm is able to assist. Leasing eases cash-flow and helps with budgeting as money for equipment does not have to be found upfront.

Why Leasing?

Leasing is a flexible, cost effective method of funding business equipment.

New assets are required for a lessee’s business but the bank won't lend; Leasing solves the problem; the lessee gets their new business asset and reserves its cash.

It allows the lessee to conserve capital and pay out of income with fixed monthly/ quarterly/ annual payments.

Leasing is used by a wide range of businesses, from sole traders to plc.’s. There are a number of benefits to leasing and a variety of reasons why companies choose to lease their equipment.

• Working capital is not tied up in depreciating assets
• Cash and credit lines are reserved for other uses
• Payments are fixed which means businesses can budget effectively
• In certain circumstances the lessee will only have to pay a doc fee of £150 + VAT in advance
• VAT on the cost of the equipment is not paid up front by the lessee
• Matches payments to the life of the asset, thereby easing cash-flow
• Match payments to cash-flow
• Providing the rental repayments are made, the facility cannot be withdrawn, unlike bank overdrafts
• The cost of acquiring the asset can be spread to coincide with the timing of sales generated by the business
• Rentals are an allowable expense against Corporation Tax

All rentals payable under a lease are 100% tax deductible. The equipment is owned by the finance company and the rentals that the lessee pay are classed as a business expense, so the lessee can off-set these rentals against their corporation tax.

All rental payments are fixed for the term of the lease, which makes budgeting easier. The lease term will reflect the useful working life of the equipment, so the lessee will pay for the equipment as they benefit from its use.

Leasing business assets instead of buying enables the lessee to keep their working capital and lines of credit free for other expenses such as rent and wages.

1pm can offer finance to buy most equipment required, with low monthly payments and simple paperwork.