How to Lease Equipment for your Business
Posted on 27th August 2021 at 16:34
Buying equipment outright for your business may be an expense out going early on so you should consider leasing where appropriate.
1. What are the benefits of leasing equipment?
When setting up your business, depending on the nature of your industry, you may have a lot of out goings to begin with. There are different kinds of leases / finance you can get which we will detail below. You can get 0% interest on some finance agreements, spread out payments to help with cash flow, tax relief on energy efficient equipment and can even have maintaining and servicing included.
2. What types of finance contracts are there?
Hire Purchase. You will pay instalments and own the equipment at the end of the agreement.
Finance Lease. You will pay instalments but won’t own the equipment at the end of the lease. The rental company will sell the equipment at the end of the lease and you will receive a pre-agreed amount of the proceeds.
Operating Lease. You will pay lower instalments but won’t own the equipment at the end of the lease or get any proceeds from a third-party sale.
3. Do I have to add leased equipment to the balance sheet?
If you buy or use hire purchase for equipment for your business, it will have to be added to the business’ balance sheet however if you use finance lease or an operating lease it may not. If your total payments, excluding maintenance and servicing, amount to less than 90% of the total market value of the piece of equipment it won’t need to be added to the balance sheet. Ask the leasing agent or your accountant for a valuation if you’re unsure.
4. What should I look for when leasing equipment for my business?
Do you need to purchase consumables along with the equipment and how is this covered by your payments?
Check the age and authenticity of the equipment, ask for evidence in writing.
Even if you have no intention of buying find out what the market value of the piece is.
What maintenance and servicing are included in the deal? Does it include spare parts? Make sure you’re clear on the costs of these and they are stated separately on the contract.
Check the process if you get faulty equipment or it breaks down completely.
What are the possibilities for the structure of the payments, example a balloon payment at the end of the contract?
Be very specific with the requirements of the equipment you need and what kind of contract would work best for you. Get at least 4 quotes from different companies, 2 larger more well-known places and 2 lesser or local leasers. Know the market value of the equipment, new and second-hand and use this to evaluate the quotes given.
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