The asset finance (business leasing) industry in UK

Asset finance, popularly known as business leasing, is a very important source of medium to long-term finance for companies in UK. According to a recent publication by Finance & Leasing Association, its members provided £25 billion of new business leasing facilities in 2003 (2002: £23.5 billion), representing around 25% of all fixed capital investment in the UK in 2003.

There are a number of reasons why business leasing has proven popular. Many small and medium sized companies are attracted to asset finance facilities because it provides a convenient and easy source of additional finance for funding the purchase of assets such as plant and equipment, computers, cars and vans. The other principal reasons are cost and tax advantages. The Common characteristics of all business leasing products are:

• helps cash flow
• low initial payment
• makes budgeting easier
• possible to obtain various repayment periods
• preserves working capital

The term 'lease' is usually used to describe a contract between a lessor (finance provider) and a lessee (user of asset) that gives the lessee possession and use of a specific asset for a period of time in return for his paying rentals. The lessor's retention of ownership of the asset is the main factor that distinguishes a lease from other forms of installment finance. There are many types of business leases (click on the links to learn more):

• Finance lease
• Hire purchase
• Contract or (lease) purchase
• Operating lease (or contract hire)
• Vendor (sales aid) lease
• Sale and leaseback

Factors to consider when deciding to lease:

• Overall cost
• The reputation of the lessor
• Tax implications
• Evidence of any unusual or restrictive covenants that are unduly burdensome or that could affect other financing facilities
• The lease term and the lessee's normal replacement cycle
• Early termination penalties and clauses
• Evidence of any hidden costs
• Can the lease term be extended and on what terms?
• Under what circumstances can the lessor increase the rental terms of the lease e.g. interest rate and tax variation clauses.

What can be leased?

Almost all types of business assets can be leased. The list includes cars, commercial vehicles, industrial & manufacturing equipment, agricultural equipment, IT & telecom equipment, medical & dental equipment, catering equipment, construction machinery and many more.

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Last modified: 19/05/2004 09:13:23