How to check you’re getting best value

best value

So, you’ve made the decision to look at using asset finance for your latest project. This might be the first time you’ve used asset finance, or you might use it regularly to spread costs, perhaps to retain capital, save tax or simply match costs to your return on investment.

The big question is – How can you be sure you’re getting the best deal possible?

It’s easy right? Whichever gives me the cheapest repayments is obviously the best option.

STOP!

stop-634941_640

A rate versus rate comparison should never be relied on in isolation as there are simply so many variables which you need to factor in to truly understand the relative merits of the raw numbers.

What variables?

There are many but they include the type of facility (e.g. finance lease, hire purchase, operating/residual value lease), the term (or length) of the agreement, any deposit requirements, the profile of the payments, additional fees and benefits such as tax savings.

Pointing the Way

directory-1699948_640

Undoubtedly trying to get to grips with your finance quote can be a daunting process, even for those who have some experience but, luckily, we’ve been doing just that for over 23 years and are happy to share some of our knowledge. Here are just a few tips and pointers to help you get a true comparison.

Using Your Own Bank

finance-108655_640

Naturally many businesses rely on their primary bank and understandably turn to them for help with other funding requirements. Recent surveys suggest that more than 80% of SMEs rely exclusively on their main bank for all their financing needs and most cite either lack of awareness of alternative finance products, or access to them, as the main reasons for doing so.

In fairness, High Street banks are generally not experts in asset finance and often rely on specialist and centralised divisions. The most common complaint we hear from our customers about the performance of their banks when they do enquire about asset finance, or other alternative products, is the sheer amount of time it takes to get any form of answer. This might be fine if you’re under no time constraints, but most businesses aren’t that fortunate, and delays can be very costly.

The main points to consider should you seek the help of your bank are:

FACILITY TYPE

Check that you know what you are being offered. Very often a loan or hire purchase (HP) product are the default which might not provide you with the optimum outcome, especially with regards to tax benefits.

FACILITY SCOPE

Often the facility will be limited to just the assets alone and will exclude any additional intangible costs such as labour and fees. Using a specialist, such as Bluestone Leasing, you can often achieve 100% project cost funding.

SECURITY

Often bank facilities require security, typically in the form of guarantees or otherwise. It is noteworthy that over 80% of the facilities that we arrange are on a totally unsecured basis even for relatively ‘weak’ (i.e. those will little or no residual value) assets.

RISK

Bank facilities are very typically offered on a rescindable basis with a foreclosure clause as standard. That means that you are at risk should the bank ever decide to call in the debt at any point which they are entitled to do without explanation or notice. In practice this would mean having to pay the full outstanding balance on demand. By comparison, all our facilities are free of this encumbrance – as long as you make the regular repayments, the agreements are never rescindable.

risk-4097298_640

General Checklist

There are many providers out there, not just your own bank, who can help you with asset finance and other alternative products. Please take a look at our post which looks at this in more detail and gives some great advice on choosing a partner to work with.

Once you’ve chosen a partner, and especially if you are looking at more than one offer, you will still need to make sure that you are getting best value. There is no standard way that businesses in the sector present their finance quotations – some might provide a wealth of information and others are little more than the headline rate. There are a few basic elements to make sure you are clear on if you want to fully understand any offer of asset finance and be able to compare it to another.

calculator-926546_640

IS THERE A DEPOSIT OR UPFRONT PAYMENT?

Although it is normal to pay 1-3 payments upfront, larger deposits can artificially make the repayments look low. An easy way to avoid this is to calculate the total cost of any facility by adding together the standard repayments along with any deposit and indeed any other fees.

For example, one quote (quote A) gives you a monthly repayment of £100 over three years whilst an alternative provider (quote B) offers you £120/month over the same period. On face value quote A is the best value until you discover that quote A requires a £1,000 deposit whereas quote B has no deposit requirement. Total repayments for quote A is actually £4,600 (£100 x 36 + £1,000) whereas quote B is only £4,320 (£120 x 36).

WHAT ARE THE FEES?

Again, although arrangement fees and documentation fees are the norm, make sure you know what they are beforehand and see how they compare to any other offer you may have. Add them into your calculation for the total cost. You can also usually expect a small (£20-50/year) administration fee charged by the funder to cover customer support costs (e.g. replacement/copy documentation) during the term of the agreement.

WHAT IS THE PROFILE?

The profile is normally expressed as the first payment followed by the normal payments thereafter. For example, a five year agreement paid monthly could be offered as a 1+59 (one payment followed by 59 further monthly payments) or 3+57 (three payments upfront followed by 57 monthly payments) profile. Our advice is to be suspicious of unusual profiles, especially ones which artificially look to be better than they are. For instance, if you are offered, on paper, a five-year agreement but the profile is 3+59, you are actually paying the equivalent of five years and two months. The monthly amount may look lower a result but will not be so attractive when you compare the total amount paid to an equivalent true 60-month agreement.

IS IT APPROVED?

There is a world of difference between a quote for finance and an actual approval with funds secured. Make sure that you know what you have been presented with and get confirmation in writing. Professional providers will generally send you a formal confirmation when finance is approved and you don’t want to find that the figures have changed only when the documents arrive for signature.

ANY CONDITIONS?

Sometimes finance approvals are subject to conditions from the funder who has underwritten the facility – this might include anything from simple provision of regular management information through to personal guarantees and other security. Ensure that you have been advised of these conditions upfront before you commit.

WHAT HAPPENS AT THE END?

Depending on the type of agreement that you’ve entered into, you might have a range of options at the end of the agreement. If your agreement is fixed term, it will come to an end at the end of agreed period, known as the primary term, whereas a minimum term agreement will continue after the primary term unless you instruct the funder otherwise, giving them suitable notice as set out in your agreement. You might want to give the assets back to the funder or pay a final fee to keep them thereafter forever. If you know what you will want to do at the beginning of the agreement, you can even get that put into writing with the funder upfront to prevent any confusion at the end.

Clear Ahead

road-1747457_640

Hopefully you’ve found this guide useful and I’d certainly encourage you to keep a copy on file for when you next consider using asset finance. We have always looked to support our clients with clear, simple advice but we know that’s not always the case in our industry so feel free to get in touch to discuss any project you are thinking of financing or, indeed, any offer you have on the table. Hopefully we can save you a headache!

Steve Russell – Sales Director, Bluestone Leasing

Choosing the right finance for you

Choose right finance

If you are about to undertake a project of any size and want to consider finance, as an alternative to paying capital upfront, then let’s take a look at some of your options.

To simplify matters we will exclude property and vehicle finance from our review. Both are specialist areas, worthy of a standalone discussion in their own right, so we will concentrate on just about everything else that a business or organisation like yours might wish to invest in.

If it is vehicles that you are interested in, please visit our specialist division, Bluestone Vehicles, here.

Let’s take a look at the most popular forms of finance available to you, what they can be used for, their benefits and key considerations.

Finance Lease

Probably the most popular form of asset finance, a finance lease, sometimes referred to as lease rental, allows you to make small, regular repayments over an agreed term (usually 3-5 years) typically determined by the useful life of the asset. As the bank technically own the goods during the agreement, a finance lease is fully tax deductible (both the capital and the interest) which makes this product attractive to profitable, private businesses in particular and even more so for partnerships and sole traders who typically pay higher rates of tax.

The VAT is also spread throughout the agreement which is helpful for cashflow (depending on timings in relation to your VAT returns) and can be really useful for those who cannot reclaim VAT at all.

At the end of the agreement you will have options including returning the assets to the funder, carry on renting or paying a final fee to keep the goods thereafter.

Flexible and tax efficient, a finance lease suits a broad range of assets and can be used across all manner of projects from IT, through to furniture and fit out.

Click below to see our short video on finance leases.

 

Hire Purchase

Probably the most recognised asset finance product given its popularity in personal finance, hire purchase (HP), sometimes referred to as lease purchase, is best thought of as just like using capital but with the costs spread over time. Unlike a finance lease, you take automatic ownership of the goods at the end of the agreement, subject to having made all your payments on time and a small Option to Purchase (OTP) fee.

Tax treatment is very similar to using cash whilst the VAT is also payable in full upfront, again, just like using capital.

HP is suited to assets that hold strong residual values and ones that you know you will want to retain and use well beyond the term of the finance. Plant and machinery are good examples of assets suited to HP.

Click below to see our short video on Hire Purchase.

 

Operating Lease

Operating leases see the funder, or lessor, take “risk and reward” by setting a residual value “RV” against the assets which represents the value they would expect the goods to be worth at the end of the agreement. The risk is if they don’t achieve the RV, the reward is if they achieve more.

Repayments can be considerably lower than an equivalent finance lease as repayments are based on the total value of the asset less the RV and the VAT is spread, just like a finance lease. A key difference between a finance lease and an operating lease is that you cannot enter into an operating lease if there is an intention for you to retain the assets at the end of the agreement.

Strict accountancy rules govern what constitutes a ‘true’ operating lease as operating leases used to be the only form of asset finance that could be treated “off balance sheet” and handled purely through the profit and loss account. Being able to keep a lease off the balance sheet meant being able to reduce debt, increase net worth and was extremely popular amongst large, listed companies sensitive to share price and investor relations.

Things changed in January this year when one of the biggest international accountancy standards bodies, the International Accountancy Standards Board (IASB), revised its guidelines under IFRS16 to essentially make the accountancy treatment of operating leases the same as finance leases.

Operating leases are still used by businesses that subscribe to different standards (such as UK GAAP) where the rules haven’t changed, by all state funded primary and secondary schools (who, constitutionally, can only enter into operating leases) or by those who see the benefit of lowering their repayments.

Due to the need for the lessor to be able to set a residual value, typically operating leases are much more restricted with regards to the type of assets that can be funded (they have to support the RV), the term of the agreement (shorter to protect the RV) and inclusion of any non-asset costs in the agreement (which would weaken the RV).

Click below to see our short video on operating leases.

 

Commercial Loans

Some projects have little or no actual assets involved at all and, as such, are not suitable for leasing. Take for example a business looking to set up a bespoke e-commerce platform where the costs are exclusively fee-based for programming, design, development, training and implementation. Although the platform will no doubt be of great value to the business when complete, it has no realisable value to any lessor, offers no security and cannot be defined as an asset for financing purposes.

This is a good example of where a commercial loan might work. The loan would be over an agreed term and would be on either a secured or unsecured basis. Secured loans would typically be against a range of assets such as property, plant and machinery, vehicles or even stock. Unsecured loans will not have such physical security but will often require personal guarantees where good personal net worth and UK home ownership are key.

Click below to see our short video on commercial loans.

 

What About Rates?

question-mark-1872665_640

There are a number of variables which will influence just how much you are likely to pay. Here are just a few of the regular ones.

  1. First and foremost, will be the covenant of your business or organisation. If you are well established, have healthy financials (profitable, positive trends, strong balance sheet) and are in a performing sector, you will attract the broadest interest and the best terms.
  2. Secondly will be the asset itself. Some assets offer greater security to the lessor than others and that is reflected in the rates that they will offer. For instance, finance for a forklift truck (strong residuals and easy to resell) will always be secured on better rates than, for instance, office furniture. The asset will also affect the term the finance is offered over.
  3. The capital value of the project will affect the pricing offered. Setting to one side the ease (or not) of underwriting the requirement, the larger the project, typically the better the rates on offer. Surprisingly to some, we can fund from as little as £500 upwards, but rates reduce as values increase.
  4. Supplier covenants mustn’t be forgotten. If the lessor is concerned about the financial or service quality of a supplier, they may reflect that in their pricing or choose not to offer the finance at all. In some cases, the lessee will have to sign a supplier waiver form taking liability for their choice of supplier should anything go wrong.

What are my chances of securing finance?

Actually, very good. We handle thousands of new finance agreements each year for nearly 10,000 customers just like you. Our success rate is over 92% which is partly to do with our extensive funding panel (over 60 specialist funders) and partly to do with our approach. No “computer says no” response here – we get to know you and your organisation and make it our business to secure you the best terms possible.

Ready to go?

Although we hope this overview and our explainer videos have been helpful for you, whether you are new to asset finance or a regular user, we do realise you probably have more questions and ones more specific to your own needs. The Bluestone Leasing team are ready and willing to assist so feel free to get in touch and we will be delighted to help.

01924 248800

info@bluestoneleasing.com

www.bluestoneleasing.com

Fit Out Finance: A User Guide

Annotation 2019-05-08 142329

There comes a point in the life of most businesses or organisations that it is time to move to new premises, take on new space or even overhaul the space that you have. There may be a myriad of reasons for this, from organic growth (you simply don’t have room for that new marketing team), acquisition, opening up a new location or possibly downsizing to a site more suitable for your needs.

The workplace is changing

The last decade in particular has seen huge changes in fundamentally how we all work – the rise of flexible and remote working, hot desking and a concentration on effective use of space with collaboration, productivity and employee wellbeing at the heart of the experience.  If you want to attract key talent, best think again about those dingy isolated workstations and drab colour schemes and, even if you find the concept of workplace happiness a little too intangible for your liking, the wealth of evidence supporting the positive impact on productivity, staff retention and, ultimately, the bottom line that engaging workspaces has, should convince even the most curmudgeonly of you that it is a good thing to invest in.

Mind the gap

railway-1758208_640

…But that’s the point. These projects are inevitably an investment, and generally a big one, regardless of the size of your organisation. Even if you have been prudent enough to budget and plan ahead for a move or refurbishment, you can probably think of many more ways you could use that capital to grow your business that doesn’t involve partition walls and new furniture. You might try to squeeze your aspirations for a fantastic new workspace into a budget that simply doesn’t fit and, at best, have to live with a compromise or, worse still, you are paralysed into inaction and try to carry on with what you have.

The good news is that it doesn’t have to be that way.

architecture-1837058_640

A new world

Asset finance for fit out projects is something that specialists like Bluestone Leasing provide organisations like yours with every day. What we have learnt over the last twenty years or so though is that, for most of our new clients, they have never used leasing for such projects ever before. There are notable exceptions when it comes to the knowledge of asset finance in business. Vehicle finance is both extremely popular and well understood as is, to a lesser degree, technology and IT finance. Most of us wouldn’t blink an eye at the photocopier (technically a multifunctional device, I know) that we are renting sat in the corner of the office but the concept that we can do the same with the cabling, lighting, furniture, ceiling grid, indeed all of the building fit out, raises at least a Vulcan eyebrow.

The lightbulb moment

idea-1296144_640

It is a great feeling for our team to see the reaction when we sit with a new client, go through the concept and explain all the benefits. Often we experience a “lightbulb moment” as the customer grasps the idea and starts to race ahead with their own thoughts as to how they can employ our solution for their project.

That all said, we are realistic enough to accept that not everyone planning a fit out project gets an introduction to Bluestone Leasing and even those that do will need help and assistance in making an informed choice.

The Guide

Annotation 2019-05-01 151822

That’s why we have introduced our Fit Out Finance: A User Guide. Inspired by a determination to offer an independent, comprehensive and informative overview of everything to consider when thinking about using finance for any fit out project.

We wanted to demystify the terminology, explain just how tax benefits works from a lay person perspective, cover all the different finance options available and the pros and cons of each. Mindful that the vast majority would be considering finance for fit out for the first time, and would not necessarily have the right contacts, we set out what to look for in a provider and, just as importantly, what to avoid.

In a sector rightly criticised for lacking transparency, we provide guidance on how to check a finance quotation is accurate, how to meaningfully compare one against another and the pitfalls to watch out for.

Although this guide is no substitute to the dedicated time our team spend with each and every client to understand fully their organisation, their needs and the dynamic of the project, it does supplement that work and provide answers to so many of the questions we have come across over the years.

Initial feedback since the recent launch of the guide has been tremendous. Clients express how simple the language of the guide is to understand, how much they like the “warts and all” approach and how much it has helped them make an informed choice.

apple-brainstorming-camera-908288

You’re welcome

Typically, we provide the guide to those clients we have already been introduced to through our partners (their potential suppliers or advisors) in the fit out sector or if they are one of our existing Bluestone Leasing customers.

So emphatic has the feedback been that we would like to extend access to the guide to any organisation, private or public sector, that is considering a fit out project and would like to learn more about using finance as an alternative to capital upfront.

Simply use the contact form here to request a copy of the guide and we will be delighted to help.

We’ve helped thousands of businesses make similar investments over the years and are proud of the quality of the service we provide. We would welcome the opportunity to do the same for you.

What’s so scary about leasing?

people-314481_640

One of the most pleasing aspects of being an asset finance provider is seeing the positive impact that the funding we secure for a customer has on their business, their aspirations and their growth. Whether it is spreading the cost of that new IT system (or even software license renewals), financing the fit out of an office space or refinancing existing plant and machinery, ultimately the outcome is always positive.

Sounds good right? Well yes, the outcomes inevitably are but that rather begs the question why don’t more businesses use it?

I must admit when I first joined the industry and learned about how leasing could benefit a client, I asked the same question. After all, many companies get to unlock significant tax benefits when choosing finance above cash whilst others are able to avoid normal budget restraints, deliver the project they want and start returning benefit to all their stakeholders. Where do I sign right?

It’s not about the numbers

Perhaps surprisingly, our experience over the last 20+ years is that the ‘technical’ aspects of whether or not to choose finance are not really the issue here. Almost formulaically, you can analyse whether or not the numbers stack up, match commercial requirements to available terms and even do detailed tax comparisons of using capital versus choosing to lease. Most of the time it makes complete sense but, inevitably, there are occasions when it doesn’t.

A recent survey starts to give us more of a clue as to where the problem truly lies. The British Bank found that over 42% of UK SMEs they surveyed do not currently use finance and are unwilling to do so whilst 68% agreed that “their aim was to pay down debt and remain free if possible”.

Debt is a dirty word in the UK, we puff our chests out and, like a badge of honour, declare we are debt free. We are proud not to use finance.

Culturally, that puts us somewhat at odds with many other developed countries. Take, for example, our near European neighbours in France and Germany. No one really considers buying property there until (and then only possibly) retirement whereas, here in the UK, home ownership is seen as one of the key indices of “having made it”. Australians are too busy spending their money enjoying life rather than sinking it into ‘stuff’ whilst our cousins in the USA would raise a Vulcan eyebrow at our determination to pay cash for everything.

We’re all doing it

The reality is that it is actually quite rare to find some who doesn’t use some form of finance in their daily life. Aside from the usual suspects (property and cars), we are all surrounded by finance agreements. From the ubiquitous mobile phone contract, through to digital media subscriptions (Sky, BT, Netflix, Spotify, Amazon, Apple etc.) and even home insurance, all are rental agreements where an element of the amount we pay covers the cost of funds, or interest to you and me.

Suppliers work hard to hide these fact from us (that £2,500 interest-free sofa is really a £2,150 sofa with the interest built in) because they too recognise our cultural hang ups. In business, look at how many things are now being offered on a subscription or “as a service” model.

Admittedly, slowly and generationally, attitudes are changing. As already mentioned, the principle of subscribing for to all manner of services is increasing popular and demand driven which is a good indication that attitudes are shifting.

skeletons-3639984_640 

See no, speak no, hear no finance

Wrapped up in our cultural insecurities around finance is also a great deal of ignorance and misinformation which hardly helps to give businesses the confidence they rightly need to do something different than pay cash upfront as they have always done.

Partly this is the fault of our industry. For too many years, too many supposed experts have cloaked the relatively simple concept of leasing in a mantle of techno-babble and confusing small print. Hardly surprising then that those responsible for making financial decisions in a business, self-confessed non-experts in this dark art of leasing, at best approach it warily or, perhaps, not at all. We’ve worked hard at Bluestone Leasing to over the years to do the exact opposite – to demystify the mechanics, to present the offer in a clear and easily understood manner and to employ ethical and transparent paperwork throughout. There is clearly much more for us and others in our sector committed to these principles to do…

Awareness of alternative finance products, and indeed providers, is another factor. Survey data has consistently shown that, outside of standard overdrafts, bank loans and credit cards, most businesses are simply not aware of other financial products. Interestingly there is considerable regional differences with, in general, a lower level of awareness outside of London and the South East.

We can endorse such findings. Take our Interiors division who specialise in financing the interior fit out for companies looking to relocate or refurbish their existing building. The concept that they can pay for their workspace much like they do their building, on a lease and spread over time is, almost exclusively, something a new client is surprised to find out. When they learn that they can include all their costs (including labour and fees) and many can save significant amounts of tax too, they are even more amazed.

fear-617131_640

Debunking the myths

The 2016 survey from Wesleyan Bank on SME Attitudes to Finance highlighted that only 24% of SMEs felt comfortable using an alternative finance provider compared to 63% who would borrow from a bank. Fear and ignorance are not exactly great motivators for changing behaviour but how real are those fears?

Leasing is complicated.

It can appear that way but it really is quite straightforward. Choose a professional advisor, not just one that specialises in asset finance, but one that gives you confidence that they know their onions and is able to articulate the concept clearly and comprehensively. If you come away from that call or meeting still scratching your head, choose again.

Leasing is expensive.

Too often clients are fixated on a rate, APR or cost in isolation. Although what you will be paying back is important, try to look at the bigger picture and factor in all the benefits that you are getting that you might not get with either cash or, let’s say, a bank loan. Tax savings, the ability to spread costs and the VAT and the opportunity cost of using cash to name just a few.

We are cash-rich, we don’t need to lease

You’ve got plenty of cash? Great – well done! Now how about making that cash work for you instead of sinking it into depreciating assets that only return value over time? Take a look at the list of clients on our website and you’ll see there’s a reason why 97% of FTSE top 250 companies use leasing. Ultimately it is less about how much cash you have and much more about how well you use it.

I use my own bank when I want to finance

Asset finance is a specialist area and, put bluntly, not a forte for most high street banks. An established asset finance business of reasonable size should be able to provide access to a myriad of alternative funders for you all focused on this arena – just make sure that they are truly independent so that they take a whole of market approach and don’t just offer their own, in-house funding.

In our case, the panel is now in excess of 60 and over two thirds of our funders are not accessible to you directly. At the very least, benchmark what your bank can do against these alternatives.

Finally think carefully whether or not using one bank exclusively for all your finance needs is sensible for you. Consider the idea of spreading your risk and retaining those credit lines with your existing funder(s) for when you need them.

halloween-959826_640

Putting the lights on

Like many things that, on face-value, look sinister, once you understand how they work, things all make sense and you realise there is nothing to be scared of. I look back on the black and white Horror Double Bill (every Saturday night on BBC Two in the 70s) and remember the terror I experienced as a young boy with only mild amusement and warmth today. Like them, leasing holds no real monsters, just those that we imagine to exist.

Steve Russell

Director, Bluestone Leasing

Education Leasing – A road trip

learn-897410_640

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:

  1. Scale down the project to meet the budget you have available
  2. Deliver the project piecemeal across a number of different budgetary periods
  3. 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.

Setting Off

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.

back-view-backpack-bag-207697

Which way?

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.

access-anytime-logo

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.

academy-accomplishment-celebrate-267885

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.

Happy motoring!

Bluestone Leasing sign the Women In Finance Charter

s300_WiFC-gov-uk

Bluestone Leasing are delighted to announce that we have signed the Women in Finance Charter, one of the first asset finance brokers in the UK to do so.  This represents our unwavering commitment to gender diversity at all levels of our business.

By signing up, organisations pledge to promote gender diversity by:

  • Having one member of our senior executive team who is responsible and accountable for gender diversity and inclusion
  • Setting internal targets for gender diversity in our senior management
  • Publishing progress annually against these targets in reports on our website
  • Having an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets on gender diversity.

The gender balance at Bluestone Leasing is already excellent, something we are very proud of, however we recognise there is still a long way to go in our industry in general.  By signing up to the Women in Finance Charter we are committing to continuing with our efforts whilst helping to drive awareness of the need to address the unequal gender balance across our industry.

“We are proud to already have a diverse team, by signing up to the Women in Finance Charter we are demonstrating our commitment to continue what we are doing and to promote best practice across our industry.  We firmly believe that having a diversity of people and ideas within our company is good for business – it’s good for our partners and clients and it’s good for our workplace culture.”

Vineesh Madaan, Managing Director

You can find out more about this HMRC initiative by visiting:

https://www.gov.uk/government/publications/women-in-finance-charter

SME Finance: How difficult can it be?

SME Finance Blog

With 5.6M SMEs (firms with 0-249 employees) in the UK, representing 99.9% of all businesses, employing 24.3m people and delivering 51% (£1.9 trillion) of gross turnover, the importance of SMEs to our economy cannot be underestimated.

A recent Federation of Small Business (FSB) survey suggested that access to finance remains a key concern for small to medium size businesses in the UK with only one in eight seeking external finance. With over 50% of small businesses (50.4%) looking to expand in the next twelve months, despite ongoing economic uncertainty in the UK, the tension between these aspirations and access to finance is worth considering in more detail.

Strong survey data, such as the British Business Bank Business Finance Survey, seems to corroborate anecdotal evidence that business leaders and entrepreneurs do not consider fully, or at least are not aware of, their options when looking to grow or invest in their organisations. Outside of standard term bank loans, overdrafts and credit cards, most SMEs have limited awareness of other available products and, more worryingly, their access to and awareness of providers of such products is significantly lower still.

key-951783_640

This is reflected in just how many SMEs still rely, almost exclusively, on their own bank for access to finance. A 2016 “SME Attitudes to Finance” survey by Wesleyan Bank demonstrated that 63% of SMEs would feel comfortable borrowing from their bank but this drops to 24% with regards to using an alternative finance provider. Around 80% of bank applications are successful (although this drops to just 50% for first time applicants) but that still leaves about 80,000 failed applications each year and a funding gap of £3.2bn in the UK. In this context, it is perhaps understandable why so many economists regard this gap in funding as a major brake on prospects for SME growth in the UK.

It has been suggested that perceived difficulties in securing alternative finance is also at play in the minds of SME leaders. Again, the evidence seems to support this with the British Business Bank survey reporting that 56% of SMEs described their perception of obtaining external finance as ‘difficult’. It is reasonable to assume that demand for alternative finance is artificially suppressed amongst these businesses with a subsequent impact on SME opportunity for growth or assistance with cash flow.

Fortunately, the reality is much more positive than the perception and, for those prepared to investigate options other than their bank, there are some real opportunities to reduce their reliance on their primary funder and to access exciting alternatives often on much better commercial terms than their bank can offer. But where to start?

pexels-photo-313690

As a starting point, my advice to any SME is to find an expert and specialist finance partner to work with. Often, for investments, manufacturers and suppliers will be able to recommend potential providers whilst industry bodies like the National Association of Commercial Finance Brokers (NACFB) can help too.

Look for a partner that is well established in their field and financially strong –good indications that they have the experience, systems and skills you should be looking for. Make sure that they are fully accredited – The Financial Conduct Authority (FCA) took over from the Office of Fair Trading back in 2014 and they operate a robust permissions system which all credible players will have in full. Be wary of operators acting as agents of others and not actually having full FCA permissions in their own right.

It is increasingly important to make sure that the provider can offer a true “whole of market” approach and is entirely independent. Although most companies in the field run their “own book” (where they provide the finance rather than a third party institution) this should not be artificially promoted and should be balanced by an extensive and broad funding panel. For instance, in our case, our own book accounts for less than 5% of the overall business we write, good evidence that our solutions are driven by the client need and not ours. Meanwhile our funding panel is approaching 60 banks/funders of which over two thirds are not directly accessible by UK businesses. Look for a partner who can offer you this level of true added value.

For asset finance, choose a partner that can demonstrate a broad base of assets that they can support and knowledge of your industry or sector. For example, we have specialist divisions such as technology (where we even fund 100% software projects), interiors (financing the entire costs of fit out including labour and fees) and Health & Fitness (everything from gyms through to medical equipment).

Ideally, look for a range of debt finance solutions (such as asset finance, cash flow finance, VAT/tax loans, bridging finance etc.) from your chosen partner as the relationship you are forming should be one that will last for the long term. Ideally your partner should be able to support you with different facilities as the needs of your business develop and change over time. Flexibility might not seem so important at first when you have a specific need in mind, but it will be at some point.

pexels-photo-943630

Last, but not least, make sure you can work with them. Trust is important in all business relationships but never more so than when dealing with finance. Do they take time and effort to get to know you, to understand your business and make sure they maximise the chances of securing the facility you need? If it’s just about the numbers (or worse still just the dreaded online portal), think carefully if this is really what you are looking for.

Although success can never be guaranteed, spending a little time to get the right partner will absolutely make a difference. We are really proud that over 92% of applications that we propose are successful and, over the last 23 years, we have secured facilities that have helped over 10,000 UK SMEs protect their cash flow and achieve their growth aspirations. For our SMEs, securing finance through alternative funders other than their bank is pain-free, speedy and on the best terms available in the market.

If you would like to know more about how we can help you, we’d love to hear from you.

01924 248800     info@bluestoneleasing.com         www.bluestoneleasing.com