What is equipment leasing, in plain terms?
Short answer: You rent business equipment for a fixed term and pay regular rentals; the lessor owns the asset.
Why it matters: Leasing moves a lump-sum CAPEX into predictable OPEX, preserves cash and banking lines, and matches payments to the asset’s productive life.
What affects my lease rate?
Two main reasons , Credit strength, asset type . A large CNC lathe has a good residual value, whilst an IT system even after one year is with only a fraction of the original cost. If possible,get a comparison rate, check that the lease rate is on the same lease profile, i.e, 3 + 33 if monthly, or if quarterly 1+ 11.
What can be included beyond the hardware?
Usually installation, delivery, commissioning, and certain software.
How are rentals structured?
You can normally choose ,the main options are either monthly or quarterly. In certain circumstances, annual payments are an option.
What is a lease profile?
A lease profile is the frequency in which the rentals are repaid to the leasing company. In a three year lease you can either pay monthly or quarterly. For example 1+35 is one month in advance followed by 35 monthly repayment, similarly a 3 + 33 is three months in advance followed by thirty three monthly payments. The same applies to a typical five year term, 1 + 59 or a 3 + 57. Quarterly payments are normally 1 + 11 for a three year term or a 1 + 19 for five year term.
Are the lease agreements fully compliant?
Yes all of the agreements we offer are fully IFRS 16 compliant in the relevant countries.
What happens at the end of the lease period?
Depending on the type of lease, finance or operating lease. With finance lease, you normally have an option to buy the equipment for a nominal sum depending on both the funder and the country. You will also have the upgrade option during the period of the lease where you can upgrade your equipment to the latest model. With an operating lease, the title to the Equipment will revert to either the supplier or manufacturer.
How do I choose the right leasing company?
Hard to evaluate, I would go for recommendation, reputation, and reviews. You need to be sure of experience, knowledge and transparency in both pricing and contract.
Transparency is crucial, always be aware of any commission being paid, and to whom, checking that the lease contract is a fixed term, and not a minimum term rental, and thirdly see if they are affiliated to a professional body with a statement of principles.
Do I need a large deposit or downpayment?
Normally a lease will require only one to three months in advance upfront. This helps with your Capex budget.
What documentation will I be asked for?
Depends very much on the amount of the deal, most underwriters will require full set of up to date accounts, plus if possible draft accounts or Management Information. The last three months bank statements, director information, and the supplier quotation. To comply with KYC, photo ID will always be required before payout.
For larger tickets size, further information will be enquired, and included cash projections cash-flow model, project rationale, service/maintenance plan, and sometimes covenants.
Will personal guarantees be required?
For new start SMEs, almost certainly. For mature credits, very rarely.
