Skip to main content

Why buy when you can borrow?

There are many reasons why businesses like to own their equipment, but the benefits of leasing rather than buying can be considerable – especially when equipment has to be regularly replaced or upgraded.

Leasing is an obvious option for any business that wants to optimise its cash flow. There has been a clear trend in recent years away from asset ownership towards cost-per-use as businesses realise that they need to manage their working capital in a different way in order to keep cash on hand in case of need.

This approach to asset acquisition is particularly useful when a business needs a specialised piece of equipment or a high value asset to fulfil a contract over a limited period of time.

Spreading the load

Increasing productivity is vital to maximising the profitability of any business. As we have discussed in previous blogs, there is no point working harder or longer if your output does not improve.

However, one of the best ways of maximising productivity (acquiring a new piece of machinery or equipment) will put considerable pressure on cash flow if you choose to pay for it upfront. With so many businesses struggling to cope with the economic impact of coronavirus the chances of customers asking for longer payment terms is higher, so using an asset finance product such as leasing to acquire equipment will allow you to spread the acquisition cost over a much longer period.

In sectors where ongoing investment is essential to remaining competitive, leasing can provide access to new equipment without the capital expenditure. The asset finance provider takes the risk on how much value remains in your asset at the end of the contract.

Making leasing more pleasing

Lease providers have introduced a variety of initiatives to make their services easier to access, including simplifying the application process, allowing customers to sign their documents electronically and giving them access to their contract details via online portals.

They also offer flexible leasing solutions to match customers’ requirements, whether they are looking for single asset financing or larger, multi-drawn down products.

If you have encountered difficulties obtaining funding from your business bank you might find asset finance more accessible. You may also be able to agree a payment structure that is specific to your business’s circumstances or industry trading patterns, which could result in either lower monthly repayments and a lump sum, or the ability to spread the cost quarterly.

The power of information

Whether you lease or use another form of finance, finance providers will base their decision on your current cash flow and outgoings. Using a cloud-based accounting solution such as Big Red Cloud will make this information much easier to access.

Maintaining up-to-date accounts makes the process of applying for asset finance less painful. It also means you have a more accurate picture of the financial health of you company, which can help you make more informed decisions about other aspects of the business.