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Vendor Finance

Frequently Asked Questions

What are the advantages of leasing?
Unlike other financing methods, leasing is equivalent to 100% financing because typically no down payment is required. Leasing offers flexible solutions depending on your specific needs.

Why should I lease equipment instead of buying it?
Leasing is flexible. A lease provides the use of equipment for specific periods of time at fixed rental payments and allows you to be more flexible in managing your equipment needs.

Leasing is practical. By leasing, you transfer uncertainties and risks of equipment ownership to the lessor, which allows you to concentrate on using that equipment as a productive part of your business.

Leasing is cost effective. Equipment may be expensive and some costs can be unexpected. When you lease, your risk of having to operate with obsolete equipment is lower because you may be able to upgrade or add equipment to meet your changing needs.

Leasing helps conserve your operating capital. Leasing keeps your other lines of credit open, helping to better manage your balance sheet.

What types of equipment do you finance?
Most equipment used in businesses is generally acceptable for leasing.

How long will it take to obtain credit approval?
The answer varies between lenders and with value, for example with small ticket leasing it is usual to expect answers within hours, but with a large ticket transaction especially where the lender has existing exposure it can take 2 weeks or more to obtain full formal approval although an indicative answer is much quicker.

How does it work?
The lessor buys the equipment from your supplier and then leases it to you (the lessee). After you sign the lease or hire purchase contract, the supplier invoices the lessor, who, having paid the supplier for the equipment, starts to charge you the monthly or quarterly rentals by direct debit.

What are the main differences between leasing and hire purchase?
VAT - With hire purchase you normally pay all of the VAT with your first payment. Leasing spreads the cost of the VAT which is applied to each monthly or quarterly instalment.

TAX - Both finance methods can provide you with savings to offset against your year-end taxable profits. With HP, you can claim 25%, (small companies can be 40%), of the equipment cash price in the first year, then 25% of the balance in the second year and this continues on a reducing balance basis each year. With leasing, all the lease payments you make in the financial year can be offset against your taxable profits for that year.

OWNERSHIP - At the end of the hire purchase agreement, title to the goods passes to you for a small transfer fee, usually £50 - £100.

At the end of a finance lease you generally have two options:-
To continue leasing, based on a peppercorn rental; or
You can sell the goods on behalf of the lessor who lets you keep the majority of the sale proceeds.

Do I have to be a limited company to qualify for leasing?
No. But the equipment has to be used for business purposes.

What information do we have to supply to the leasing company?
This depends upon the size of transaction, for most limited companies information is available from Companies House, partnerships and some other organisations will be asked to provide accounts but for some small transactions it may not be necessary to provide any information.

Can I include other equipment from several different suppliers in one lease?
Yes.

Can I lease second-hand equipment?
Probably.

Can I raise some cash by re-financing equipment I already own?
Probably.

Do you have a minimum, or maximum transaction size?
The minimum amount depends upon the scheme, for example for a small ticket WEB based vendor scheme we may be able to go as low as £1,000. There is no real maximum amount but the details of a particular lease may dictate a maximum, for example residual desires, tax shelter availability and credit appetite.

Can support and services be financed?
Yes. Maintenance may be financed over the term of the agreement. All equipment must be maintained while on lease. The lender will typically wish to avoid performance risk on the maintainer.

Can I brand lease documents with my own logo?
Yes, but in the UK there are some general guidelines that we need to adhere to, for example we must ensure that the lessee is aware who the lessor is, often achieved by having the lenders logo on the document at least the same size as the suppliers.

How long does it take to set up a vendor program?
It depends…. A simple program in one country could be set up very quickly. If a scheme was envisaged that required a new financial product, or bespoke documentation, or pan European, or international cover then this would take longer.

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