The UK economy has experienced some callous conditions over the past two years, making it very difficult for some companies to invest in their futures. Lending from financial institutions has been notoriously hard to come by. With sales dwindling as everyone has tightened their belts, many businesses have been putting off decisions to upgrade or replace their equipment.

Is your business equipment old and outdated?

It means that many companies are left with essentially ‘rusting’ assets that are no longer fit for their purpose, and this can have some very negative consequences. Old purchases will inevitably attract higher and prolonged maintenance costs, contribute to business downtime and lack of productivity, and crucially mean that a company is no longer competitive in the market place. In the case of assets such as IT systems, out of date equipment could even leave the company vulnerable to security risks and virus attacks.

How can financing help your business?

So what are the options? Companies could take the plunge and invest precious operating capital in asset replacement with their fingers crossed that the economy will pick up. They will make the cost of the purchase back very quickly in increased revenue levels. However, this means that the business has no contingency in the event of a cash flow crisis and limited opportunity to invest that capital into other business areas that might increase sales. Conventional loans are a possibility but inevitably require payment far over and above the asset’s worth, which will have little resale value – if any – at the end of its usable life.

Is leasing the answer to help with cash flow and budgeting?

The critical alternative is to consider leasing, a form of asset’ rental.’ The leasing company owns the investment, and takes the risk on its residual value (its resale value), and leases it back to the customer over a fixed term – the lease period. The customer can anticipate fixed costs over this term and understand what the asset will cost them in the end. They can use the capital they would have otherwise spent on the support to invest in other business areas – staff, marketing, product development, etc. And the leasing company is responsible for the disposal of the asset – which might mean resale (a car at auction, for example) or environmental disposal (technology equipment that must be recycled).

How can you find out more about asset finance?

Asset finance provides peace of mind and takes away much of the hassle and cost of ownership that outright purchase attracts. Many reputable providers on the market are often supported by banks, who can lend against assets, so deserving to speak to a financial adviser for some recommendations.

 

 

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