Finance leases

We Compare the Invoice Finance Market

  • Release Funds to Improve Cash Flow
  • Quick Finance Solution
  • No Need to Chase Payments
  • Greater Flexibility for Your Business
Get a Quote

Finance leases

Updated: 5th February 2020

Finance leases are a form of equipment lease, and offer businesses access to high value assets without the capital cost. Sometimes known as capital leases, ownership is not transferred to the business at any stage, and the asset does not appear on the balance sheet.

Commercial finance leases are similar to operating leases in that terms are fixed over the contract period, but finance leasing is a longer-term arrangement over the majority of the asset’s useful economic life.

A further feature of finance leasing is that you are usually responsible for repairs, servicing, and maintenance.

How does finance leasing work?

The lender purchases the asset (plus the VAT), and leases it to your company on the pre-agreed terms. You may need to pay an initial deposit. At the end of the agreement the full cost of the asset, plus interest, will have been repaid – this is called the primary rental period.

When the lease comes to an end there may be several options available:

  • Return the asset to the lender
  • Agree with the lender to sell the asset and receive a proportion of the sale price
  • Arrange a secondary rental period with the lender

It is worth bearing in mind that by the time the primary rental period has elapsed the asset will be nearing the end of its useful life, so depending on your business needs this could affect your decision.

What types of business use finance leasing?

Businesses looking for a cost-effective way to access high value pieces of machinery, vehicles, and equipment, may be interested in finance leasing as a funding option. The fact that it does not use up valuable working capital is a major benefit.

Finance leasing may be particularly suitable for manufacturing, transport, engineering, and aviation businesses. Essentially, organisations requiring the use of a key asset over the long-term may find finance leasing an attractive option.

 
Logo
  • Low-cost Finance for UK Businesses
  • Funding 1,000+ Limited Companies Since 1989
  • Broad Range of Financial Products
Visit UK Business Finance
Refused a CBILs or Bounce Back Loan?
Alternative Finance Options Available
Logo
 
 
 
 
 

What are the benefits of finance leasing? 

  • Working capital is protected
  • You do not have to pay the VAT upfront, as with hire purchase
  • If your business is VAT-registered, you can reclaim the VAT on your repayments
  • Repayments can be offset against profits for tax purposes
  • Flexibility can be built in to the lease terms according to the needs of your business
  • If you choose to sell the asset at the end of the agreement, you benefit from a cash lump sum
  • You have better control of cash flow

Are there any disadvantages?

  • You do not take ownership of the asset at any stage
  • Your business is responsible for maintenance, repairs, and servicing

Finance leasing is similar to hire purchase, but a key difference is that assets acquired via hire purchase appear on your balance sheet. This may be beneficial or a disadvantage depending on how your business is set up, and whether you would rather claim the repayments as an operating cost.

If you would like to know more about finance leasing and whether it is an appropriate form of funding for your business, Real Business Finance can help. We are finance leasing specialists and have contacts with over 50 of the best commercial finance lenders in the country. Please contact one of the team for a free consultation.

Request a Quotation for Finance

We Compare Over 50 Finance Lenders for the Best Solution

Processing...

Here at Real Business Rescue we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Director Support - Business suffering from Cash-Flow Problems?
If your company is financially distressed, we also offer the below services:
Business debt recovery

  • Recover Unpaid Invoices of £5k+
  • Expert Credit Control Services
  • Stop Late Payers & Bad Debts
Visit Site
Time to pay experts

  • Get Breathing Space with HMRC
  • Support with Business Tax Arrears
  • 35 Years HMRC Negotiation
Visit Site
UK Business Finance

  • Rejected for a CBILS Loan?
  • Get Emergency Business Funding
  • Supporting 1000+ UK Companies
Visit Site
Who we help
  • Company Directors
  • Finance Directors
  • Sole Traders
  • Accountants
  • Small Businesses
  • Large Businesses
  • Partnerships
Menu