Recovery Loan Scheme – What Does This Mean For Your Business?

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The Recovery Loan Scheme launches on the 6th April and will run until the 31st December this year, subject to review.

Similar to CBILS, the Government will guarantee 80% of the finance to the lender, hence hopefully making some company borrowing decisions easier.

There are three type of finance, term loans, invoice finance and asset finance.

Term loans

These are available from £25,000 to £10m and are over terms up to six years.  No personal guarantees are needed on loans up to £250,000.

Leasing and Asset Finance

For agreement between £1,000 and £10m per company with lease repayment up to three years.

Will asset finance and leasing companies offer the Recovery Loan Scheme?

Yes. A range of asset finance and leasing companies have already been signed up to the previous CBILS scheme. Many of these leasing companies will apply and be accepted to offer leasing via the Recovery Loan Scheme.

What are the benefits to my company using a lease organised via the Recovery Loan Scheme?

  1. There is a higher chance the leasing company will give you a credit acceptance
  2. No personal guarantees are needed on lease deals up to £250,000

Will the interest rate on a lease using the Recovery Loan Scheme be the same as a normal lease?

Yes.

Can you use the Recovery Loan Scheme and also get the 130% Super-deduction tax relief?

Yes, as long as you use a lease purchase or loan agreement, subject to the normal rules such as your credit, qualifying brand new assets etc.

Can I use the Recovery Loan Scheme if we have already received support via CBILS?

Yes, you can still have access to Recovery Loan Scheme finance, subject to credit and eligibility criteria.

Recovery Loan Scheme Approved lender

WestWon work with a range of approved lenders who can offer funding via the Recovery Loan Scheme. If your business is looking for a Recovery Loan or asset finance, please call a member of our team now on 01494 611 456 or email [email protected]

Does Super-Deduction tax apply to leasing?

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Unsurprisingly the question we’re being asked the most by our customers and suppliers is ‘Does the Super-Deduction tax apply to leasing?’ We’re also being asked how the relief works and how it can benefit their business.

The super-deduction 130% first year tax relief on qualifying assets is a major boost in the arm to UK capital equipment investment. Announced in the Budget, the scheme runs from the 1st April 2021 until the 31st March 2023.

Let’s take a look at the impact on leasing and asset finance.

How does super-deduction tax apply to leasing?

You should be able to claim the 130% super-deduction tax relief when you sign a lease purchase agreement. From a Corporation Tax planning exercise, the tax position on lease purchase agreements is the same as if you were to pay cash for the asset.

What is the Government / HMRC saying about lease purchase / hire purchase agreements?

The Government has quoted, “Hire Purchase or similar contract must meet additional conditions to qualify for the super-deduction and special rate relief.”

What does this mean? The UK leasing sector is asking for clarification, however, the widely held belief is that you can use a hire purchase / lease purchase agreement and still get the 130% first year allowance tax relief.

What does “qualifying main rate plant and machinery” mean?

Lorries, vans, tractors, computer equipment, manufacturing equipment, solar panels are all qualifying assets. Certain assets are exempt from this scheme.

What does super-deduction tax break mean?

You can claim 130% of what you send on equipment against taxable profits.

Why is the Government doing this?

They are expecting to raise the level of UK business investment by 10% this year and to bring forward other investment.

What is the tax saving impact of super-deduction tax?

A company spending £50,000.00 on assets in a year would get £65,000 of tax relief. At 19% tax, that would mean a tax saving of £12,350.00.

Let’s look at some of the areas where you cannot claim super-deduction tax relief

Is the funder (technical name lessor) able to get the 130% super-deduction?

No

Can you get the super-deduction tax relief on lease rental agreements?

No

Can you get super-deduction tax relief on car finance?

No

Can you get super-deduction tax relief on refinance deals or sale and leaseback?

No

Can the plant and machinery be used or second hand?

No

I am both the manufacturer and customer, can I claim the tax relief?

No, they do not allow related party transactions.

Where can I read more about the Super-Deduction Tax?

The government have published the draft bill this week and can be viewed here.

For more information on lease purchase agreements or to discuss if the assets you’re financing apply to the Super-Deduction tax relief, please contact us on 01494 611 456 or email us on [email protected].

Is Leasing Right For You In The Current Climate?

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Our Dental Divisional Director Richard Porter explains why leasing might not always be right for you in the current climate.

Leasing – Good or bad for Dentists?

Despite 70% of dentists still going down the leasing route; I wanted to look at why 30% of dentists find it better for them to make use of Bounce Back Loans

Let me put this into context; as a dentist who may be thinking of purchasing new dental equipment, dental chairs or even that new car, you will be faced with many different providers of finance.

However, in the current climate is Leasing or Hire Purchase really the best way to purchase the equipment?

After spending the last 20 years working with dentists, I like to think I have a good understanding of how the sector purchases their equipment from the suppliers, you may also be thinking:

“Why is he in finance and saying this?!”

30% of our clients are choosing a Bounce Back Loan rather than a lease.

The two obvious lending facilities out there, are the Bounce Back Loan and the CBILS loan scheme, two new financial products which the majority of us have become experts on. To those who may not know, back in April, the government announced the launch of a new whizzy, fast-track loan scheme to support our small businesses during the pandemic crisis.

The Bounce Back Loan scheme was one of measures to help support small and local industries with vital cash injections and securing economic growth.

Where I feel there are pros and cons for both CBILS and Bounce Back, I cannot ignore the fact that the Bounce Back Loan is by far one of the best forms of funding available to you.

With nothing to pay for the first 12 months and a rate of only 2.5%, not to mention a term of up to 10 years, and no fees for paying it off early, this is by far the best form of borrowing available to you.

The way forward

The Bounce back is getting negative press for billions of pounds of fraudulent claims, but that aside this type of loan has helped 1000’s of businesses use the funds for the greater good.

The bounce back loan however is still not right for everyone – and in fact as many as 70% of dentists still choose to utilise traditional leasing routes. In many cases Dentists do not fit the criteria required to apply – for example, a business is not able to take out a Bounce Back Loan Scheme facility if they have been approved for a CBILS facility, and vice versa.

In this instance Leasing and HP is a sure-fire way to avoid depreciation, reduce maintenance costs and ensure you stay ahead of your competition by regularly renewing your equipment and facilities. This will always be the case, but in the current climate and while it is still available, bounce back loans are the best way to make purchases while it lasts. Presently, both the Bounce Back Loan and CBILS schemes are  set to close on the 31st March this year.

Whether you sit in the 30% or the 70%  – we here at WestWon are here to guide you on best course.

To see how Richard or another member of our team can help you, please give WestWon a call now on 01494 611 456 or email [email protected].

 

WestWon launches new Optical Finance app, available to download now

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How do you value a leasing broker?

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It is a question I often get asked on a regular basis, how do you value a leasing broker? For the sake of this blog, I am just going to focus on leasing brokers with less than twenty employees.

Large leasing brokers that have been sold

Many of the UK’s largest leasing brokers have sold out over the years. Wyse Leasing, Syscap, Henry Howard, Kennett, Premier Asset Finance, Lease Direct Finance are just a few of the well-known names.

Selling a large leasing broker is a totally different project to selling a smaller broker with under twenty staff. The main difference being who will be the acquirer? With larger brokers, the target purchaser is a funder or private equity house. Leasing funders and private equity players are often not interested in smaller leasing companies.

Who will buy a small leasing broker?

Firstly, I do not intend to be of offense to the hundreds of hard-working, successful leasing brokers business owners up and down the UK by calling your business “small.” I only use this word to differentiate your business when looking at who an acquirer would be.

Let us look at some key points:

What is the sector you are involved in and do you have a speciality?

A leasing company just doing HGV vehicle leasing was sold to a vehicle insurance company.

A company focusing on professions loans was sold to Syscap, another leasing broker in that space.

A telco leasing company could be sold to a telco supplier. Same applies to IT or office furniture.

It may be a large office equipment supplier or manufacturer would buy your leasing broker to provide them with the infrastructure as opposed to setting up a leasing company from scratch.

A high net worth individual looking to invest his funds in an own book position.

And then there is the obvious answer…another larger leasing company!

In summary to who will buy a leasing broker, sometimes the answer is not as obvious as you think it will be.

What is the value of a leasing broker?

When we sold Wyse Leasing many years ago, the value was mainly calculated as a net present value of the end of term income and then an additional small sum for the brand, which was quickly ditched by the way! An interesting point here, we worked really hard over many years investing into brand development thinking this investment will only improve the value of the company. Take a look at all the brokers who have been sold. Wyse Leasing, Syscap, Henry Howard are just a few well known leasing brands where the company name has been dropped.

More recently, buyers have been valuing business on volume of business written. The more deals done, the more money lent, the higher the value. This is great if you are a funder looking to acquire. The maths is quite simple, XYZ Leasing company lent £50m at 8%, our cost of funds (as the buyer) are 5%, hence we will automatically put on £50m more volume at an additional 3%.

For us, we will look at five key elements:

  • Client portfolio
  • Employees
  • Supplier relationships
  • Funder relationships
  • End of term income

Let’s look at these in more detail.

Client portfolio

How many clients? What sectors, What size of company? Where are they located? What equipment have they financed?

How often have they been called? Was a welcome pack sent out? How much bad debt is there? How many clients have taken payment holidays?

Is there a CRM system in place? Is the data quality high? Does every client have their registration number? Website address? Full contact details?

At WestWon, we have analysed out the lifetime value of a client using averages to work out how many companies repeat order and what on average is the true profit per deal written. Can you do the same?

Sadly, nearly all brokers I speak to do not know the value of a client and do not have a process of keeping in touch with them other than a monthly email.

Employees

How many? Where are they located? How easy/expensive will it be to exit people? Are there great people you can promote? Are there any key salespeople? Have you got all the personnel records? What has been the staff turnover?

What about self-employed salespeople, consultants commission only etc?

Your team has a value, finding good people is hard. I would put a value on each member of staff and then reduce this by any potential liability.

New supplier relationships

Be careful, just because you have an amazing supplier relationship does not mean they will stay should you leave, sell up, retire. I have seen this far too many times when we buy a great business based on a supplier relationship only to see circumstances change when a deal is done to buy/sell a company.

Saying that, good quality supplier relationships will bring in future business.

Funder relationships

Is there a funder you do not presently deal with? If so, who are they and will they add value in your business?

Many years ago, when Wyse Leasing was doing about £5m per year of leasing business with Siemens Financial Services, we bought a small broker who was doing £1m per year with them. This broker was getting better rates than us. We brought this to the attention of the funder, and they reduced our rates, the extra profit paid for the acquisition.

End of term income

This is the real annuity stream. End of term income, being a share of secondary rentals or title in equipment is real future profit.

If you only do business loans, car finance or hire purchase deals, there is no end of term income. This makes it significantly harder to put a value on your company.

Valuing a broker at zero

I spoke to one broker who was looking to retire. He had 400 clients that did repeat order, all on hire purchase agreements. There was only one employee and he was looking to retire.

Clearly, he had fantastic relationships with some of his clients but in the end, I could not put any meaningful value on his company.

Lets recap

We look at the five key points above and drill down into the business seeing where the worth is. For us, top dollar is paid when we can see an end of lease base with funders we know well. Here, we can net present value the future revenue streams and pay a meaningful price.

Author

Jeremy Hall, CEO of WestWon Limited. For further information, help, assistance, or a chat if you are looking to sell your leasing brokerage, please call me for a confidential conversation.

WestWon Acquires First Leasing UK Limited

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WestWon are pleased to announce the acquisition of First Leasing UK Limited.

Not to be confused with, First Vehicle Leasing, 1st Leasing or First Leasing Software – companies with a similar name – First Leasing UK Limited was set up in 2002 by Paul Connell.

First Leasing is a leasing and asset finance broker and works with a range of well-known funders in the UK. The company does not have an own book position.

The company has a range of business loan clients and recently completed a number of CBILS loans. The majority of the client base are for companies who have leased equipment.

Speaking on behalf of WestWon, CEO Jeremy Hall noted, “We very much appreciate Paul Connell selling us his business and trusting us to look after his existing client base. Over time, we will be contacting all of their clients to introduce ourselves and to start the process of developing a longer-term relationship with them to act as their leasing company.”

First Leasing is the fourth acquisition by Jeremy Hall / WestWon this year. With regards to First leasing, in client numbers terms, this was a modest acquisition adding a few hundred customers onto what is a growing client base.

George Shillingford who is heading up the project internally at WestWon was pleased to add, “We are enthusiastic about buying either a leasing company or the IP (mainly the client base). In the case of First Leasing UK Limited, we acquired the company. We do have a specific use for this business going forward.”

We acquire leasing companies for five reasons:

  • Client portfolio
  • Employees
  • New supplier relationships
  • New funder relationships
  • End of term income

George further noted” Every acquisition is different. In the case of First Leasing, we have satisfied three of the five criteria, the company does not have incumbent staff that are staying with the business or providing funder relationships we were not already trading with.

Our primary aim is to build our end user client base. We know from over thirty years of leasing and asset finance it is ten times easier to sell back into an existing client than find a new one by cold calling. It is not just that you are a known entity, but a trusted name. It is down to the culture of the client’s business and their perception to how their business should and can be funded.”

We thank Paul Connell again for the opportunity and look forward to working with First Leasing clients and suppliers.

Should you be a leasing broker that is looking to sell your business, please contact George Shillingford at WestWon for a confidential conversation on 01494 611 456.

Will asking for a lease payment holiday period affect my ability to take out a new lease agreement?

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Lease payment holiday requests in the UK Over the 30 years we have been arranging leasing and asset finance for 25,000 plus organisations, we typically only see a handful of companies every year asking for a lease payment holiday. Since the outbreak of COVID-19 in the UK, we have seen more businesses applying for a […]

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Will a Bounce Back Loan or CBILS Loan affect my ability to obtain lease finance?

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From conversations we have held, many SME companies who have undertaken a lease via WestWon have confirmed to us they have taken out either a Bounce Back or CBILS Loan.  A number of these business owners have directly asked us asked the question, “Will my Bounce Back Loan (or CBILS Loan) affect our ability to obtain lease and asset finance in the future?”

The implications of a Bounce Back Loan on your balance sheet

Let us firstly look at the financial implications on your company balance sheet. (We have assumed you have taken out the maximum loan allowable under the Bounce Back scheme of £50,000.)

You have created a current asset, cash of £50,000. Likewise, you have added a long-term current liability of £50,000. We say a “long term liability” as the loan facility repayments will start in twelve months. Hence your Net Current Assets position will remain unchanged.

Bounce Back loans being an insurance policy or used to reduce existing debt

Quite a few companies we have spoken to have taken a Bounce Back Loan as an insurance policy. They have put this money aside and presently are not using it to fund the business. This makes financial sense and is a prudent thing to do.

Likewise, there are company directors who have used a Bounce Back Loan to clear off an existing company overdraft or to reduce an existing bank loan. Again, there is a clear financial benefit here, you are clearing historic debt down almost certainly at a higher interest rate. In the background, we know that people are using the Bounce Back Loan facility to get out of banking agreements where they have a personal guarantee.

From the perspective of obtaining a new lease, the two options above would not have any impact on your future ability to obtain lease finance.

Using a Bounce Back Loan to invest in your business

We have spoken to other companies using a loan to put down as a deposit on a commercial vehicle. Another company has used a CBILS loan to pay a rental deposit on a new building. Others have used it to buy stock or build a new website.

These are all legitimate uses for the Government backed loan and will not affect your ability to raise new leasing and asset finance in the future. However, we would like to add, we must tell the underwriter:

  1. Have you taken out a Bounce Back or CBILS loan?
  2. What have you used the loan for?

Using the loan to tide you over whilst business income has been reduced

Most companies are using the loan to help cash flow whilst sales and profit are down, again a legitimate and sensible use of the facility.

Leasing companies must lend to stay in business. If they do not lend, then ultimately, they will look to reduce costs and “wind down their lease portfolio.” The job of their underwriters is to look at all prospects customers and ask themselves one simple question, “Will this company be able to afford to make the 36/60 monthly repayments and will they still be in business at the end of the lease term?”

To make their task easier, underwriters now require most lease proposal forms to have a COVID-19 attachment. This is a one-page document that we can help you fill in. Its primary purpose is to illustrate what steps you have taken to keep trading and how the pandemic has affected your business.

So, going back to our original question using this example, will a Bounce Back Loan or CBILS Loan affect my ability to obtain leasing finance? We would say no. However, there is a big caveat here, our job is to positively explain why you have taken out the loan and more importantly, what steps have been taken to protect your business.

Summary

There are many different reasons for taking advance of a government backed loan, some positive and others negative.

All underwriters will take into account the effects on a company’s longer-term cash flow when they have to start paying back a Bounce Back or CBILS loan. Also, not forgetting how COVID-19 has affected the business.

With most new lease proposals, we will look to ask a number of questions around the impact of COVID-19 on your business and if / why you have taken a loan out.

Our job is to arrange finance for your company, our doors have always been open for business so if you have taken out a loan, please feel free to call us for all your leasing needs.

Garden office pod finance

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The market for garden and home offices has exploded since March. One supplier we have just spoken to has stopped all advertising, they cannot keep up with demand and are busily recruiting new installers.

Garden office pods – as these home offices are typically referred to – is the latest must have for business owners. Even though available on Google from £3,000.00 + VAT, many business owners are spending between £20,000 and £40,000, and some buildings costing as much as £75,000. Kitchens, bathrooms, a meeting room and office space are a prerequisite for companies with a small team of people.

Two key questions are being asked:  Who pays and how are they financed?

Who pays? – is this an asset financed in a personal capacity or paid for by a company? It seems that there is a mixture of both. Buying in a company name is a legitimate business expense, even though they are located at the home of the business owner.

How? – Individuals and companies have been paying for garden office pods as a cash purchase.

Garden office pod finance and leasing

However, things are changing. It is now possible to lease a garden office pod for business use. There are some really good benefits to this:

  • The company can reclaim the VAT on rentals
  • Leasing a garden pod ensures you can get full tax relief on all the rentals, over the three or five year lease term you can fully amortise the cost of the building
  • You pay for the garden chalet as you use it, the same as you would do paying rent for an office
  • You do not have to fund the cost by cash upfront

How leasing and finance is helping people buy a garden office pod

The key issue why companies are not looking at a garden office is normally due to the fact they cannot fund the £10,000 to £75,000 cost out of cash flow. Leasing overcomes this issue.

As an example, a £25,000+VAT building would cost about £550 +VAT per month over five years. Significantly less than paying a third-party company rent, rates and service charges, as well as time and travel expenses. The fact that all companies will look to take ownership at the end of the lease period is a key factor.

Can you lease an office pod for a private individual?

No, leasing is only available to companies. Private individuals would have to use their own money or take out a personal loan / extension to a mortgage.

Can you lease a garden office pod even though you have another office / warehouse / factory?

Yes, we are leasing office pods to companies where the director(s) wish to work from home a few days per week.

How does the process of leasing an office garden pod work?

You choose the supplier and office pod design.

You would still need to ensure you have all the correct planning applications – if appropriate – in place. It may be such there are restrictions on you or your colleagues working from the home environment.

We then take the supplier quote and will provide you with a leasing quote.

We arrange for the leasing credit to be put in place and send you lease paperwork.

The supplier then installs the building, they will require a deposit which will be refunded to you when the lease agreement goes live at the point of completion.

Our funder will pay the supplier invoice and then you make a regular monthly lease repayment, normally over three to five years depending on your budget.

Overall, it is a very simple process.

Who will finance or arrange leasing on a garden office pod?

We do. Please call WestWon on 01494 611 456 for more information and a formal lease quote.

WestWon’s Richard Porter Interviews With Leadership In Dentistry’s Nicki Rowland

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Listen and watch our very own Richard Porter, Divisional Director of the Professions sector being interviewed by Nicki Rowland from Leadership in Dentistry. During the interview Richard discusses the new Dental Finance App, the WestWon Bounce Back loan along with the new supplier App, Partner Portal and all things dental!

The interview is ready to be viewed in full here: https://vimeo.com/450047530

WestWon continues to support the dental sector, and due to the good work and its unique approach has been recognised by several dental groups. The interview follows our exciting announcement last week of our partnership with The Association of Dental Administrators and Managers (ADAM).

For more information on our Dental Finance offering, please speak to a member of our team on 01494 611 456.

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