Finance Lease

Finance Lease – Asset Finance to Make the Most of Valuable Assets

To any business, regardless of its size, assets are important. After all, a considerable part of its worth is, at most times, tied up in various assets. These assets play a crucial part in the growth of the business, as well. Some assets like land and buildings provide an intangible value to the business, while others like machinery, vehicles and technology are essential for the day to day operations to continue.

But it’s not always possible for businesses to purchase an asset by paying for it upfront. In fact, scenarios arise in which purchasing an asset is neither feasible nor reasonable. Finance Lease – a specialty type of Asset Finance – can be the ideal solution in such cases.

Please visit this page to compare the features of various types of Asset Finance.

What is Finance Lease?

Finance Lease is a subset of Asset Finance. It allows the borrower to ‘lease’ an asset for a certain period of time. The borrower never really owns the asset, either fully or in part, in this case.

Finance Lease is an important source of financing for businesses of all sizes. While discussing Finance Lease, it becomes more appropriate to regard the lender as the ‘lessor’ and the borrower as the ‘lessee’.

Finance Lease – How Does It Work?

We have discussed how Asset Finance works on this page. Finance Lease follows the same template for the most parts. However, there remains one notable difference. Common assets like vehicles are usually already owned by the lessor. Such lessors are known as specialist Lenders, and they exclusively deal with the assets they own. To put it simply, the Lender and the supplier are one and the same. In such cases, the lessee can directly lease the asset from the lender, thus avoiding much of the paperwork.

If the Lender doesn’t already own the asset, you may have to look for a specialist supplier. Regardless of these possibilities, the supplier will always claim the ownership of the asset at the successful conclusion of the finance term.

Such leasehold transactions are often financed through leasehold mortgages.

Benefits of Finance Lease

Finance Lease helps the borrowing business on multiple fronts. We have summed up the prominent advantages of leasing an asset below:

Cashflow Preservation

The most attractive advantage of choosing Finance Lease over other Asset Finance types is the affordability. However expensive the asset may be, your business is always very likely to be able to afford the monthly rentals. This allows you to preserve the cashflow so that it can be used towards other expenses such as settling the salaries or other overheads.

Added Flexibility

The Lenders assume lesser risk when they rent an asset out. Therefore, most Lenders agree with a repayment schedule that is in sync with your sales cycle. In addition, you can choose to terminate the Finance Lease prior to the end of the loan term by paying a small surcharge. This, however, is at the Lender’s discretion.

Tax Deductions

This is another way in which a Finance Lease can help you afford expensive assets. You will have to pay the VAT only on the rental payments. Since you will not own the asset at the end of the term, you won’t have to pay any capital gains taxes that may be due upon the sale of the asset. Furthermore, the rentals are tax deductible (against profits) in most cases.

Finance Lease – Will You Be Responsible for the Asset?

The answer to this question varies from one case to another. This aspect is usually dealt with while drawing the lease contract.

Generally speaking, the lessee will be responsible for the safety and the maintenance of the asset. The lessor will assume the costs of depreciation and other risks that come with the ownership of the asset.

Let Us Find You the Most Suitable Finance Lease Offer

Finance Leases have multiple advantages to offer. However, drawing a profitable Finance Lease contract isn’t always easy. Unfair lease agreements can force you to pay much more than you should. This is where a reliable whole of market broker like Commercial Finance Network comes to the fore.

Our vast experience in brokering Finance Lease packages for UK businesses of all sizes allows us to find the best lessor for you. We also work closely with them to negotiate a fair, profitable and affordable lease agreement on your behalf.

Get in touch with us today to find out how our Finance Lease services can help your business lease the asset of your choice!