YOUR QUESTIONS ANSWERED – THE ADVANTAGES OF LEASING
Protects Working Capital
Equipment brought outright means that the cash you have invested becomes tied up in a depreciating asset and cannot be used for other purposes. Leasing the items of equipment you need enables you to save your cash resources for other purposes including repayment of bank loans, slow payment by your customers and unexpected problems.
Protects Existing Bank Borrowing Facilities
When you lease equipment existing credit facilities including bank facilities are not affected so that these remain for use if necessary in the future.
Better Budgeting
Lease payments are not effected by changes in interest rates so that unlike bank loans or bank overdrafts you can accurately budget for these payments for a fixed amount over a fixed period of usually two to five years. These payments are usually made by bank standing order or direct debit on the same date monthly or quarterly.
Tax
For businesses paying tax leasing can be very attractive. Leasing payments including VAT may be deducted from taxable profits, which of course reduces the net cost of leasing the equipment.
Low Initial Outlay
Most lease agreements either stipulate for one month or three months rentals in advance. Then you simply make regular payments throughout the life of the agreement.
YOUR QUESTIONS ANSWERED – UNDERWRITING CRITERIA
Q. Why do you need my bank statements?
A. It is a standard requirement for our underwriters to request 2 months recent itemised trading bank statements as they reflect your businesses current trends and turnover. In addition the bank statements reflect your account management.
Q. Why do you need a copy of my mortgage statement?
A. The mortgage statement confirms and evidences that you are the owner of the property, the mortgage balance and your repayment history. The facility however is unsecured and is underwritten in the name of your business.
Q. What if I live in rented property?
A. Due to the current climate it is usual for the underwriter to require an outside personal guarantee from a shareholder/investor or relative who is a home-owner. (The guarantee is only enforced if the account should default by more than 2 months, at which time the lender would approach them to request that they meet the rentals due under the terms of the agreement.)
Q. What happens at the end of the agreement?
A. It is standard procedure that title of the equipment will be offered to the lessee for a nominal sum.
For new-start businesses further supporting information may be required, e.g. Business Plan, Head of Terms for Business Lease, etc.