If your fast-growing business requires high value equipment, such as plant or machinery, to service your customers’ needs, an operating lease could provide an accessible, short-term and low-risk financial solution. This type of alternative finance enables you to rent an asset over an agreed period of time without having to accept any risk of ownership.
An operating lease enables business to utilise high value assets to deliver and expand their service offering by paying a fixed monthly rental fee over an agreed number of months. Operating leases are particularly suited to companies that require the use of equipment for a short period of time.
This type of alternative finance is sometimes referred to as business contract hire or, in the case of vehicular assets, commercial vehicle hire. It can be used for any asset that would expect to retain a residual or resale value, such as vehicles, plant, machinery, tools or printing equipment.
Ownership of the asset is retained by the finance provider, who generally offers flexible terms at the end of the agreement. Once the lease has expired and all repayments settled, the business can return the asset to the lender. Alternatively, the contract can be extended, at which point the option to upgrade may be possible. In some cases, the business could be given the opportunity to purchase the asset for an agreed price based on its residual value.
An operating lease provides a quick source of funding for businesses requiring high value assets. Find out if you qualify for a competitive operating lease. Please complete our online application and you will receive a decision from one of our alternative funding partners within hours.
For some businesses, purchasing expensive equipment outright is not an option, either because it is simply too expensive or the company’s existing working capital is needed for other activities, such as payroll. An operating lease allows businesses to rent the equipment they need – known as assets – and pay for its use in fixed, monthly instalments over a relatively short timeframe.
As ownership of assets remains with the lender, an operating lease is a form of off-balance sheet financing. This means the equipment is not listed as a company asset. Instead, it is classed as a rental expense.
As the asset retains some residual value, it is possible to secure terms that require the lender to provide a maintenance facility. This can include servicing, repairs and spare parts to ensure the equipment remains operational during the lifetime of the agreement and beyond. As most operating lease agreements are short-term, a business will only use a fraction of its useful life, so it is in the lender’s interest to keep it in good working order.
Many alternative finance providers will offer the option of upgrading the asset either part-way or at the end of the agreement. As repayments are generally fixed, businesses can budget effectively for using the very latest equipment during the lease period.
All businesses, even new start-ups, can benefit from operating lease agreements. Companies must be registered to operate in the UK and possess a relatively good credit history. Most alternative finance providers will consider leasing equipment to start-ups if a personal guarantee can be offered. Operating leases are typically suited to VAT registered organisations.
If you do not qualify for an operating lease agreement, we may have other finance options that would better suit your situation. We partner with an extensive network of alternative finance providers and together we will help to find the right funding solution for your business. Please view our range of alternative finance products.