Continuing our regular series, Cedabond commercial director Mark Kendall reveals the benefits of dealers offering commercial asset finance to lease catering equipment:
Payment, or lack of it, is always a hot topic. As part of this regular slot I thought it was time to share some of the benefits that Cedabond is seeing for members who use commercial asset finance for end user projects/equipment and business capital expenditure or, to give it its more common name, leasing.
Leasing is not new by any means, but developments with regard to accessibility, understanding and the pure benefits in relation to profit and loss are often lost in the myths about difficulty and eligibility. At Cedabond we have seen the amount of business done via leasing agreements through us grow by more than 40% year to date, with enquiries soaring for our partners. In these uncertain times, being paid within 4 days of delivering a piece of equipment or completing a project has huge advantages in relation to P&L and cash flow. As indeed do staged payments, another popular leasing option.
We are seeing a range of solutions on offer with members providing leasing facilities based on Pounds per day on individual capex items ranging from dishwashers to refrigeration. This way, the end user avoids the need to tie up much-needed cash as the purchase becomes an operating cost on the P&L rather than a depreciating asset on the balance sheet. Other options are project-based staged payments that are agreed for first fix items such as coldrooms and ventilation systems. This allows Cedabond members to manage their cash rather than waiting, sometimes in excess of 90 days from completion, for money to be paid.
There are numerous advantages of leasing or renting equipment:
• No need to pay the full cost of the asset up front, so you don’t use up your cash or have to borrow money.
• Access to a higher standard of equipment which might otherwise be too expensive to buy outright.
• Pay for the asset over a fixed period of time which helps to budget for the future.
• As interest rates on monthly rental costs are usually fixed, it is easier to forecast cash flow.
• The business can usually deduct the full cost of lease rentals from taxable income.
• If the asset is not bought outright there is no need to worry about any overdraft or loan taken out to finance the purchase being withdrawn at short notice and thereby forcing early repayment.
• The leasing company carries the risks if the equipment breaks down.
Many equipment suppliers within the hospitality sector have been nervous since the involvement of the Financial Conduct Authority (FCA) as they are unsure what they can and can’t discuss. With the help of companies such as Cedabond supplier Complete Leasing Solutions (CLS), this uncertainty can be removed. CLS even has a handy quoting tool.
A finance option will help overcome price objections and budget restrictions and increase profit margins. And nobody ever lost a sale by offering an alternative payment method.