Equipment Finance from Burlings Bank International

Equipment Finance

Burlings Bank International – Business Equipment and Property Finance

- Leasing

To finance the purchase of any type of equipment today often can best be done by using a leasing construction. Even equipment that companies have purchased previously but which are less than 8 years old can still be sold to a leasing company, yet the item still can remain in use. This will release capital for the owner which can be used as working capital. This relates to virtually any type of equipment, which can normally be divided into moveable and stationary categories:

Movables
Cars and vans
Lorries and trailers
Forklift trucks
Buses and limousines
Cranes and bulldozers
Planes and yachts
Security vehicles

Stationeries
Printing presses
Production lines
Packaging Machinery
Laboratory Equipment
Computers and IT
Furniture and fittings
Heating and ventilation

During the technology boom of recent years many companies reverted to adopting leasing constructions for their IT and technology purchases or equipment finance. Among the main reasons was the fact that most organisations did not budget adequately for their IT needs, partially because there was a great lack of knowledge as to what was exactly needed and when. But the real driver was the fact that the fast changes in technology demanded continuous updating of installations. Leasing is an excellent way therefore to maintain your vehicle or equipment stock in up-to-date and high effective order.

Main Benefits

While it is often stated that one of the main benefits for equipment finance leasing is related to tax write offs, it is always essential to first check with your accountant or tax consultant if this is indeed the case. The type of equipment to be purchased and the jurisdiction from where the purchase is being financed determines to what extend a tax benefit exists. We urge all purchasers of any type equipment, whether by finance or not, to do their homework in this regard.

One common factor however that all equipment finance buyers have is that their company or organisation have a continuous need for working capital (= business fertiliser). Rather than using it to purchase depreciating items like vehicles or other machinery, it could often be better used to fund the day to day operations. If both the equipment becomes obsolete and the cash run out, it is then that companies really get into trouble. Another consideration relates to the fact if the finance equipment money to buy equipment comes from a bank loan, your bank will continuously keep this facility in mind when discussing any other financial requirements you as a company may have.

So if a lease purchase will be the best solution, then the add-on benefits can be substantial, not least relating to the down payment. On most capital purchases between 15 and 50% of the value has to be paid as a deposit. Leasing here will compare favourable with often just two or three monthly payments to get started.

A key advantage often overlooked with leasing is the benefit that the equipment is being paid for as it is being used, or rather as it is contributing to the performance of the enterprise. A typical equipment lease is for 3, 5, or 7 years, enabling return of the equipment to the leasing company and obtain a more up to date and thus more efficient models. When equipment is purchased outright companies feel they need to keep it for years, even when it has reached its sell by date. While this might look good in the books as far as overheads are concerned, the increased production or performance efficiency that a new model would bring is thereby overlooked.

A Summary of the benefits of Leasing over Borrowing to purchase can be formulated as follows:
- No down payment - Purchase the most suitable model
- Lower monthly payments - Preserves capital and/or credit lines
- Tax deductible for business use - Long term financing
- Fixed expense - Trade-in possible/or purchase later
- Avoid economic obsolescence - Helps offset inflation

What does a leasing provider look for in a leasing client? Probably the usual I hear you say, and probably you are right. As in any type of finance arrangement a client’s ability to meet the monthly payments is essential. Therefore any leasing company will look for: the time the client has been in business; the relationship with his/her bank; any available collateral; relationship with suppliers; the principle’s credit history; comparable credit or borrowing; financial statements and accounting records.

In most cases however a satisfactory solution can be found.