Nick Youle: Loan risks spark hire interest

Comet business development manager for hospitality, Nick Youle explains how funding problems can be overcome though leasing arrangements

The current economic climate means businesses need to become ever more focused on core business objectives. Identifying what can be changed and improved, in order to become more profitable, has become a key focus. The method by which electrical equipment is funded is no exception.

Keeping your electrical equipment fresh and attractive helps to attract and retain customers and stay ahead of the competition. While opting for outright cash purchases is great, an increasing number of our customers are finding it difficult to make the required outlay available.

Many hospitality businesses see bank loans as a good option. This may be true for many areas of their business, as long as the banks are willing to lend, but it's not necessarily the best equipment funding solution.

Interest rates over the loan period can vary and you may also be required to secure the loan with your assets, meaning that there can be an element of risk attached. What's more, using your bank for this type of funding can leave you with huge exposure to one organisation that handles all your day-to- day cash flow, particularly if their attitude to your business changes.

As a result we have found that leasing or hire purchase of equipment is an option that is becoming more popular.

The basic principle is the operator chooses the equipment, the finance company buys it and then charges monthly payments over its prime useful life. There is no need to secure the leasing against your other assets as the equipment assumes this role.

Agreements are designed, as far as possible, to suit the organisation's cash flow. Net monthly or quarterly payments are fixed for the life of the agreement, and there are also significant tax benefits for the private sector.

Equipment with the value of £1,000 upwards can be leased over a period of three to five years and at the end of most leasing, and all hire purchase agreements, ownership can be transferred to the organisation. In addition packages are scalable and can be extended and added to as a company develops.

Few operators would pay their staff three years in advance, so why not take the same approach to your electronics equipment? Get the best quality equipment working for you, but pay for it while it is actually working.