One of the primary concerns for many businesses is finding the funding to upgrade equipment and machinery.
This is especially important for a fledgling business who may lack the liquid capital to invest in the assets they require to grow.
Fortunately, making a sizable upfront investment is not the only way you can get your hands on the equipment upgrades you need to expand your operations.
Business equipment finance is changing business landscapes, benefiting both the end-user business and B2B equipment suppliers, but what impact is equipment finance having, and what can we expect in the future?
Why are businesses turning to B2B leasing?
Simply put, funding from traditional banks and established lenders is getting increasingly difficult to secure, especially for new startups and young businesses. This has become so severe that there is a £22bn funding gap for UK SMEs, which demonstrates the significant challenges that SMEs face when trying to secure the funding that they need to grow.
Business equipment finance provides SMEs with the financial flexibility that they require, and can help you to secure the crucial equipment and other assets that you need to meet your growth KPIs without seeking additional investment or taking out a high-interest business loan.
By spreading the leasing costs over a longer period of time with a fixed interest rate, your business can streamline your budgeting, allowing you to accurately forecast for regular direct debit payments, improving your cash flow and avoiding major upfront costs.
Businesses can also lease the equipment without having to worry about natural depreciation, as it can be returned at the end of the agreement. In addition to this, leased equipment can often be upgraded at the end of the lease for a marginal rental difference, providing your business with the opportunity to utilise the latest technologies.
How does this change business landscapes?
Many industries have long been dominated by large corporations & international conglomerates.
However, in recent years we have started to see the SME truly come into its own, using business equipment financing and flexible payment plans to become truly competitive.
There is a long way to go, with bank lending to SMEs on the decline, but there are other options, such as independent financing, that are helping SMEs to become substantially more competitive.
It is no longer just about how much up-front capital you have. This dramatically levels the playing field.
Once approved for small business equipment financing, you may be able to list the cost of equipment as a monthly rental expense, rather than a capital expenditure or asset – significantly reducing your tax outgoings if eligible, freeing up capital to be used to further improve your standing in your industry.
Business equipment financing is the stepping stone on which new businesses can become competitive. Business landscapes are shifting towards favouring the service, agility and flexibility of an SME, and many small businesses are taking advantage of this fact to great effect.
The first step is securing financing for your SME. To do this, you may need to move away from the big banks and look to alternative finance.
What business equipment finance options are available to your SME?
The flexibility of equipment finance agreements, from fixed interest rates to contract duration, is what makes equipment finance work so well for SMEs.
Here are five types of equipment financing agreements you can find with an independent lender and how they work:
Finance lease
A finance company purchases the equipment for your business and will lease it to you over time.
This is a popular option if you do not have the capital to pay for critical equipment up front. The lender owns the title of the equipment, but you gain access to it for set monthly/quarterly payments that are unaffected by interest rates.
Sale and Leaseback
A finance company buys a piece of equipment from your business and then leases it back to you.
This is a good way for you to release capital from assets you already own by selling it to a lender and committing to a set repayment schedule.
Hire purchase
A piece of equipment is leased to your SME with the option to buy the asset at the end of the agreement, often for a nominal fee.
This is a popular way to purchase commercial vehicles or equipment. If you want to own the asset at the end of the leasing term, then hire purchase might be perfect for you.
Seasonal leasing
If your SME is highly seasonal, you do not want to be burdened with payments in your off season.
With seasonal leasing, your repayment amounts are set to reflect your unique seasonal trading periods, making repayments significantly more manageable.
Low-start lease
A low-start lease is a superb way to invest in new equipment while reserving a little extra cash in the short term.
This allows your SME to pay as little as £50 per month for the first 3 to 6 months before regular payments start, giving you more time to get established and build up capital.
No matter which agreement solution you choose for your SME, you can rest assured that you’ll have the equipment you need to help your business become truly competitive with larger enterprises in your industry.
What assets are eligible for equipment financing?
Almost anything can be financed, from cars to livestock, plant machinery to IT software. Whatever your business requires, you’ll likely be able to finance it.
For examples of what you might want to finance, click here to see a range of leasing options that might suit your growing SME.
Business equipment finance support from Shire Leasing
With business landscapes shifting towards favouring SMEs, it is no wonder that you may be considering finance options for your SME – now is the perfect time to invest and grow.
At Shire Leasing, we understand that finding alternative business equipment finance solutions can be daunting and often stressful. However, we believe that this should not be the case.
Our team of business equipment finance specialists help UK SMEs just like yours to access the equipment and assets they require to accelerate their business growth and meet KPIs.
If you have any questions, or want to talk about finding the right financing options for your new business, talk to our experts today by clicking here.
