Even in a vibrant marketplace the decision a business takes to acquire equipment using the most advantageous platform available should be paramount. Leasing not only represents a viable and available source of funding, but it goes one step further, it allows the principals of the enterprise to make decisions that will lead to strong revenue growth, savings and operational efficiencies.

Particularly pertinent in today’s economic climate, the decision to acquire new equipment is not only a financial one; it is often a question of business survival. To expand product and service provision to meet or maintain customers’ demands and expectations is often the stuff of nightmares. This is especially true for enterprises facing the difficult decision of whether to commit precious resources to investment in new equipment, knowing they will face protracted, slow, indefinite or even nonexistent returns on that investment.

Therefore the choice of how to acquire the equipment becomes as vital to the business operation as the actual equipment select on itself and from here on we attempt to unravel some of the questions decision makers face on a day-to-day basis.

A business needs to understand what the equipment will do for its operation before determining the route for funding that equipment.

Here there are 3 simple considerations:

  • Is the Equipment a business driver: i.e. does it generate revenue, or reduce costs?
    IF YES: LEASE and in some cases OWNERSHIP
  • Determine the Equipment’s true value;
    • Is it an appreciating asset or a longer term revenue generator?
      IF YES: Long Term – OWNERSHIP, Medium Term – LEASE
    • A depreciating, short life, or low return asset: LEASE
  • If it does not ‘fit’ into the above categories; is it a business enabler (tools, service or knowledge), or a non­-business value item (a chair or a desk) with a low tangible return expectation? LEASE

This is the initial financial benchmarking point in determining the equipment’s strategic and commercial value and how to harness the best financial returns on the investment.

A simple business maxim can be applied “own appreciating assets and lease depreciating assets”. Good advice, providing the business has the financial resources to follow this guideline. The question truly becomes what is an appreciating asset in today’s climate?

The next consideration is that of available acquisition options vs. actual business requirements.

There are many constraints on capital to businesses these days, whether it is a business’s own balance sheet, their cash flow management, or, more and more prevalently, restrictions in supply from traditional banking and other investment type institutions.

As such the availability of capital is reduced and the cost and barriers to obtaining them are much higher.

This understanding of what the equipment will do for the business, aligned with a good understanding of availability and merits of funding alternatives, lead to a better funding selection choice, or at worst case, identify the few options remaining available for consideration.

This is where leasing becomes a business critical option for all businesses be they large or small, established or new, robust balance sheet or otherwise. In fact over 95% of businesses lease, often without any strategic consideration.

So why should businesses consider Leasing? Simply, Leasing delivers the following features:

  •  Affordable economic management
    • Reduces capital outlay
    • Allows equipment access for minimal outlay
    • Matches costs to recovery in market
    • Allows time to repair stressed capital balance sheets
    • Preserves Capital and Funding lines

From these basic premises we can elaborate on the benefits a Leasing solution brings to a business’s decision-making process

  • Provide vital funding for asset acquisition
  • Allow business to take advantage of market conditions
  • Maximise revenue generation or cost reduction in the business
  • Payments are fixed and aligned to business budgets
  • No capital budget required
  • Easier to demonstrate return on investment over time
  • Tax efficient
    • Vat only paid on rentals
    • Lease rentals are fully allowable against corporation tax each and every year
    • Ownership benefits are less tax efficient
      – Reduced Capital Allowances on ownership
      – Reduced AIA to £25k and only for 1st Year
  • Better cash flow management

In an ever-uncertain economic climate, a business needs to consider carefully how and why it acquires equipment. Leasing represents both a viable and an available source of funding to businesses today. Providing ease of access coupled with prudent cash flow and balance sheet management.

D&D Leasing is a full service provider of equipment financing and leasing that specifically targets the ‘story-credit’ or alternative funding marketplace. An area where traditional bank type funding was  not, or more predominantly, is now no longer provided. We offer financing to those companies that need a helping hand acquiring the equipment their business demands. Whether it’s for non standard assets, relatively new enterprises, or companies with bruised balance sheets, D&D Leasing will attempt to fill their financing gap. The benefit for the customer is clear; they receive their equipment funding into their business where they otherwise may not. The benefit to D&D Leasing is also clear; we fund our customers business requirements, matched to their financial situation, at a return that reflects the inherent risk in this chosen sector, while generating a return on investment to our investor partners ensuring continuation of funding into this crucial sector of the economy. In all cases we ensure that both sides of our business chain are well cared and catered for.

The authors are the MD and Director of Sales of D&D Leasing, a Canadian leasing company that has recently opened in the UK. D&D Leasing welcomes investment enquiries and can be contacted via Wingrave Yeats in the pursuit of any questions or interest.Tel:020 7495 2244

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