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Finance Lease

Finance Lease

What is a Finance Lease?

Financial lease arrangements provide greater flexibility than other asset based lending options. In principle, a finance lease enables you to use the machinery or equipment without buying outright.

This type of machinery finance increases your options at the end of the lease period and reduces your repair and maintenance liability during the rental period. However, you should check the terms of the rental carefully.

Finance Lease

How does lease finance work?

Lease finance, in essence, is a rental agreement. You pay rent and get full use of the equipment, vehicle, or machinery in return.

You can work with the renter to tailor the flexible rental period to your business’s cash flow and needs. Over the rental period, you pay the asset’s total cost, including interest.

At the end of the primary lease term, you have three options, you can:

  • Enter a secondary rental period and continue to use the asset
  • Return the asset to the lender
  • Sell the asset and retain a part of the sale income
Finance Lease

Benefits of a finance lease

  • Cashback – Obtain the majority of the asset’s sale income if you choose to sell at the end of the lease
  • Flexibility – We design the lease period and rental payments to match your cash flow
  • Low initial outlay – Access the assets you need without substantial upfront investment
  • Reduce costs – Reclaim VAT on rentals
  • Tax-efficient – Offset the rental against pre-tax profits

Finance vs operating lease

If you need short term access to machinery or equipment, you may want to consider an operating lease instead. This works in much the same way as a finance lease but for shorter periods, allowing greater access to upgrades and more flexibility.

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