Paying upfront for equipment or an asset can be a significant drain on the working capital for most businesses. In 2014, raising finance for business equipment and assets continues to be a challenging issue for companies, particularly new businesses just starting out.
With highly competitive interest rates and agreements, there is no doubt that leasing can offer an advantageous alternative to buying for start-ups. But how easy is it for a new business to get a lease agreement?
Well, obtaining a lease agreement can be more challenging for new businesses than established companies, but it is by no means impossible. In fact, arranging a lease agreement can be less complicated than applying for a loan. Some leasing companies like WestWon are increasingly working with new start-up companies and can provide specialist advice and guidance.
Generally, a new start-up will be required to submit their personal financial statements, personal tax returns, a business plan and details of equipment they wish to lease. Once submitted, the information is reviewed and a business should be able to obtain a quote and a decision in principle soon after.
There are several types of lease agreement, which allow a new company to acquire the assets they need to run their business without upfront capital outlay. What leasing does is enable the equipment to be paid for over a fixed period of time – typically two to five years through a series of contractual, tax deductible payments.
Leasing is great for new start-ups as it can help improve cash flow by preserving their working capital. This leaves funds available to reinvest elsewhere in the business or to cover unexpected costs that may arise. Many businesses also find leasing advantageous from a budgeting standpoint as switching from outright purchase to a lease agreement changes how the equipment is accounted for.
Leasing offers considerable tax benefits for new businesses too. Lease ‘rental’ payments are an allowable business expense that can be set against profit – thereby potentially reducing your tax bill. Other methods of equipment acquisition, such as outright purchase, do not have the same level of tax benefit.
For more advice on leasing and selecting a reputable leasing partner, download your free Essential Guide to Leasing for Business or call us on Tel: 01494 611456 for practical tailored advice.
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