It is well documented that traditional high street banks have generally done a poor job post the credit crisis in supporting small businesses with vital access to finance but this is an issue which concerns all organisations, regardless of size or sector.
Thousands of businesses, no matter their size, report the same difficulties when seeking funding from the traditional banks in the wake of events post 2008.
Fortunately there are alternative solutions and our growth (we have doubled in size over the last two years) demonstrates that funding is available from specialist banks extremely keen to lend to the UK business market for asset investment through partners like Bluestone Leasing.
Although the option to lease is key for those without the necessary capital for their planned projects, increasingly for others, often extremely cash-rich, it is not about available money but rather about how you deploy that capital.
We fund a huge range of assets ranging from technology (IT hardware and software) through to furniture and fit out but a number of characteristics remain consistent. Firstly, the assets always depreciate from the start (we have yet to fund a vintage car or piece of art) and always return their value over time.
Given that there are often significant tax advantages for private businesses choosing to lease, this begs a powerful and important question. Why would you want to pay, in full and upfront, for assets that do return value over time and depreciate from the beginning, especially if you can save tax by spreading the costs too?
The answer typically comes down to two reasons – one cultural and one a factor of education. Culturally, in Britain we have a peculiar attitude to both ownership and borrowing. Our near continental neighbours and others around the globe, in the US and Australia for example, are much more open to using finance as a tool (both in business and privately) to achieve their objectives whereas in Britain we are fixated on owning our homes and proud to be free of debt. Although clearly nefarious practices in personal finance (payday loans spring to mind) don’t help, these reservations can be deep seated and subconscious for many.
Educationally, the majority of our new customers simply have no idea just how much they can lease or the main benefits. They may have leased vehicles, for example, in the past but being able to finance IT (including just software) or the entire building fit out is something very new to most.
Once a customer sees just how positive leasing can be for them, typically they start to use leasing as a core element of their broader procurement strategy. Here are a few good reasons why.
- For private businesses, the costs (capital and interest) are 100% tax deductible.
- It allows you to spread the cost of depreciating assets over time and match more evenly the costs to the return on that investment.
- Make budgets work. Rather than shelve a project or reduce scope, spreading the costs allows you to get what you need now and your organisation to get the benefits of the investment immediately.
- Low, fixed costs – rates are fixed for the duration of the lease agreement.
- Manage your assets strategically. No more unexpected capital requirements when equipment fails – avoid redundancy and obsolescence.
- Reduce dependency on your primary funder(s) and leave those credit lines intact.
- Deploy your capital where it can work for you rather than sink it into depreciating assets
So the case for leasing is an extremely strong one. As we become more progressive in our attitude to asset investment, leasing will inevitably become, as evidenced elsewhere in the world, more and more the de facto solution… just as long as we can get over our cultural inhibitions in the meantime.
Get in touch with us with any questions or comments of your own – we would be delighted to hear from you.