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Operating Lease

An Operating Lease lets your business benefit from fixed costs based on a predicted annual use. The equipment remains the property of the Finance Company and you return the asset at the end of the agreed term.

  • With an Operating Lease, rental and return conditions are fixed at the outset
  • Potential for improved cash-flow through payments that are normally lower than Hire Purchase or Finance Lease as on an Operating
  • Lease the rental cost is based on the difference between an assets original purchase price and its residual value at the end of the agreement
  • VAT is payable on the rentals and these can be reclaimed (different rules for cars), so it is not necessary to pay VAT on the equipment cost up front
  • Off balance Sheet funding so it doesn’t show on your liabilities

Benefits of an Operating Lease

  • Low initial outlay – Quick access to the asset you need without a heavy upfront investment
  • Freedom – Full use of the asset without having to buy it outright
  • Flexibility – Option to re-rent, purchase or return the asset at the end of the term
  • Pay less – Rental cost is reduced as it is based on a percentage of the original capital cost
  • Off balance sheet funding
  • Reduce costs – Reclaim VAT on rentals

Hints and Tips

Before submitting an application for funding, here are some useful tips about what finance companies like to see:

  • Recent management accounts
  • Last 3 months bank statements

Funders will consider applications where a company has a history of:

  • Losses
  • Adverse credit issues
  • Bad debts