In 2015 the Finance and Leasing Association (FLA) members provided finance of £29bn - equating to 32% of UK investment in machinery, equipment and purchased software.
To help introduce smaller businesses to Asset Finance as an option to aid businesses to fund business investment and expansion plans the ICAEW, FLA and British Business Bank have published a useful guide available on the British Business Bank website.
JCB Finance, a member of the FLA and financier of plant, machinery and vehicles to UK construction, agriculture and industry for over 45 years feature within the guide.
The guide suggests valid reasons why a business may choose asset finance (leasing and hire purchase)
Updating equipment or plant and machinery can be very expensive, and often the more urgent the case, the more challending the cash flow.
Asset finance (leasing and hire purhcase), gives businesses access to the latest machinery, vehicles or technology which might otherwise be out of reach.
Perhaps you need a piece of equipment to fulfil an order, or you operate in an industry where hardware becomes obselete very quickly, or you simply need to continue production while an existing machine is repaired.
In these scenarios, where you don;t want to buy the item, leasing is a great option.
The usual arrangement is that a leasing company called the 'lessor' would buy and own the equipment on your behalf, and you as the 'lessee' would then effectively rent its use over a predetermined period. The lease agreement is usually at a fixed interest rate, which is a real bonus when budgeting or planning future expenditure.
Also, since the agreements are secured wholly or partially on the equipment being financed, the need for additional collateral is much reduced.
Alternatively, if you want to buy and own your next piece of equipment, but once again avoid the cash flow impact of an outright purchasem then hire purchase is a good option.
As before, a finance company would purchase the equipment on your behalf, and you as the 'hirier' would repay the cash price plus interest through regular payments. These agreements are also usually at a fixed rate, so help with budgeting. At the end of the agreement, there is usually a nominal fee required for you to gain ownership of the equipment.