It goes without saying that budgets across the education sector remain tight at best. Irrespective of whether or not you are in primary, secondary or tertiary education, the conundrum of what to do when staring at a gap between what you want to achieve and your budget, traditionally, only has three solutions:
- Scale down the project to meet the budget you have available
- Deliver the project piecemeal across a number of different budgetary periods
- Not go ahead with the project at all
To varying degrees, all three outcomes ultimately compromise your ability to maximise the benefit to all your stakeholders – be it staff, students or parents. Luckily there is a fourth option.
Leasing can transform how you think about your expenditure. By enabling you to spread the costs over time, you can deliver the solutions you want now without compromising your budgets. In fact, many find that not only does leasing take the brake off but that, once they see the low level of repayments, they have headroom to achieve more and their budgets travel much further.
So, having established that leasing can be a powerful tool, how does an education professional who is highly skilled, but generally not an expert in asset finance, navigate their way to choosing the best solution for their establishment?
A good starting point is identifying a credible leasing provider. There are a number of direct funders accessible to education professionals but asset finance remains a relatively specialist arena and ideally you will want a whole of market approach to ensure that you get the best solution to match your needs so intermediaries, or brokers, are often a good starting point.
Look for ones that are well established (we’ve been around for 23 years by way of example), offer access to a wide range of funders, demonstrate experience in the education space and are operationally big enough to provide good support and service. Finally check to make sure they have full permissions from the Financial Conduct Authority (FCA) which is a great indication that they will be working to audited and professional standards. It is easy to do – simple check the Financial Services Register here.
Often suppliers themselves will partner with a finance provider and you may be offered a leasing option when obtaining a quote for your project. Just remember that you do not have to use their option and any supplier of note will allow you to use your own leasing partner.
What to Pack?
You might be surprised by the sheer range of things that you can use leasing for in education. Technology is obviously popular but did you know you could finance software and licences too? How about school furniture, playground and sports equipment, modular buildings, vehicles and access control/security equipment.
The spaghetti junction of leasing can be a confusing place so let’s take a look at choosing the right product.
If you are a state-funded primary or secondary school (and that includes academies and free schools) then, right now, government regulations restrict you to entering into operating leases only. An operating lease is best described as a rental agreement where you are required to return the equipment at the end of the agreement. Unlike hire purchase agreements, for example, the funder will set a residual value in the equipment (essentially what they believe the goods will be worth at the end of the agreement) so your repayments are typically lower (as they reflect the value of the goods less the residual) but you don’t get to own the assets at the end. Lower costs are obviously good news but bear in mind that the funder will have to be comfortable that the assets can achieve a certain residual value at the end.
Recent changes to accounting rules introduced in January this year, (under IFRS16 for those struggling to sleep), may see the government relax these restrictions in future so watch this space.
Non-state funded schools, private schools and tertiary education (HE/FE and universities) are not restricted in this way and can choose from operating leases, finance leases or hire purchase agreements. The right choice will be influenced by what the assets are, how long you would like the finance over, what you would like to do with the assets at the end and what you are trying to achieve.
Removing the roadblock: Access Anytime
One of the most powerful applications of leasing in education has been the rise of the 1-2-1 student device scheme or, as we call it here at Bluestone Leasing, Access Anytime.
Over the last decade in particular, there has been a ratcheting tension between the need to embrace emerging and fast moving technology, both as a learning tool and as critical in preparing our youngsters for the world they will ultimately enter, and the demands on education budgets. For many, the concept of providing each of their pupils/students with a dedicated portable device (tablet, notebook, laptop) has been seen as an impractical dream.
Access Anytime, and other 1-2-1 schemes, have helped schools, colleges and universities turn those dreams into reality. Essentially most schemes are designed to provide a dedicated mobile device to each student or pupil joining the scheme with the costs (typically device, case, insurances and warranty) covered (in whole or part) by regular parental payments over the 2 or 3 years most schemes run for. Payments are typically modest and parents buy into the positive impact provision of the devices affords, especially in context of the fact that they get to take them home each day and keep them at the end of the scheme.
Other alternatives include “bring your own device” or ‘BYOD’ schemes (particularly popular in tertiary education) where students are encouraged to bring in and use their own devices. Be mindful however that this option does carry some disadvantages given the huge range of different devices out there (how are you going to support them all?), their varied performance and capabilities and, notably, security and safeguarding implications.
With every expert predicting a huge rise in 1-2-1 schemes in the UK over the years to come, we have put together a short video for those either wanting to learn more or looking to launch a scheme. You can access the video here.
Reaching your destination
In summary, the best way to view leasing is simply as an alternative, and potentially a powerful one, to paying upfront. In many parts of the world (near-Europe, USA, Australasia), it is actually a preferred option. They might ask their British cousins, why pay upfront for equipment that only returns value over time and depreciates from day one? Avoiding a temptation to comment on the nature of British culture and our attitude to debt, what is clear is that many education establishments have already successfully embraced leasing as part of their strategy to maximise the value they deliver to their stakeholders.
Whether you are just looking for a test drive or are eager to buckle up and get on the road, our team of education finance experts are on hand to help steer you on the right track so please get in touch.