FLEXIBLE FINANCE - FROM CP SOUND

A guide to financing new equipment

CP Sound works with a specialist finance broker, The First Group, to offer clients payment alternatives over any period between ONE and FIVE years with payments tailored to your cash-flow or budget. This guide answers most of the questions asked about finance, although we’ll be happy to discuss any further queries you may have.

Q. How does it work?

The finance company (the lessor) buys the equipment from us and then leases it to you (the lessee). You make monthly or quarterly payments to the lessor via direct debit. At the end of a Lease or Hire Purchase agreement you can own the equipment, unlike with an operating lease, which is purely a long-term rental.

Q. What are the costs for Leasing and Hire Purchase?

The cost depends on factors such as the purchase price, your credit status and whether or not a deposit is paid – an indication of cost is demonstrated below, however, please call us directly for a no-obligation quote.

Q. Do I have to be a Limited company to qualify for leasing?

No, we can arrange leasing for most types of organisations, including; sole trader; partnership; PLC; government; education and registered charities.

Q. Can I include other purchases in my facility?

Absolutely. As your agreement is directly with the finance company you can include other purchases, which in turn may also reduce your rate of finance.

Q. What about intangible items on the invoice?

Installation and delivery charges can usually be included within your finance agreement, providing they represent a low percentage of the invoice value.

Q. Do I have to pay a deposit?

Not unless you want to. Our finance agreements are designed to fit your budget, so if the objective is to retain working capital, it makes little sense to pay a large deposit, unless looking to offset payments against tax liabilities.

Q. Can I get money back on equipment already paid for?

Yes, in full, up to three months after being invoiced (“Sale & Leaseback”) and for the current market value on equipment up to three years old (“Asset Refinance”).

Q. What information do I need to supply you with?

If you are an established company and don’t have excessive debt then a copy of your most recent year-end accounts should be enough.

If your business has been trading for less than three years or you are self-employed then we may need to gather more information: every business is unique so the quickest and easiest way forwards is to call us for a chat.

Q. What are the main differences between Leasing and HP?

VAT: With an HP agreement you pay this upfront and the ongoing payments are therefore not subject to VAT. With a Lease the finance company pay the initial VAT to the supplier and apply VAT to each monthly or quarterly direct debit.
Tax: Both facilities can be offset against your year-end taxable profits. With Leasing, all the lease payments you make in the financial year can be offset against your taxable profits for that year - with HP you can claim 25%, or possibly 40%, of the equipment cash price in the first year, then 25% in the second and this continues on a reducing balance basis each year.
Ownership: At the end of a HP agreement, title to the goods passes to you for a small “option to own” fee (usually £35-£100). At the end of a finance lease our clients usually opt for one of the following:

I. Continue the agreement into a secondary rental period where a peppercorn rental is taken each year (this annual cost is usually equivalent to one monthly payment).

II. Buy title to the goods: The finance company will normally offer title at a nominal fee, however, by law title must be passed to a third party. The First Group usually act as the third party in this instance: You make the title payment to us and we in turn pay the finance company and pass title back to you.

Q. Which is best for me: Leasing or HP?

That depends on factors such as cashflow and tax status – The First Group would always recommend independent advice be sought on this issue.

Q. My business is cash-rich, why would I want to Lease/HP?

Besides the VAT and Tax advantages outlined earlier, many businesses look towards Lease/HP facilities to give them the best Return on Investment – if the regular benefit provided by the asset is greater than the cost of finance, then the purchase becomes self-funding. It was John Paul Getty who said “Buy what appreciates, rent what depreciates” – do you really want to tie up valuable working capital in assets that depreciate heavily once bought?

Q. …Can’t I just speak to my bank?

In our experience many businesses view their bank relationship as a necessary evil: whilst on paper their rates can seem attractive, other factors often lead to this option being the most costly. All facilities, whether variable-rate, fixed-rate, lease, loan or overdraft, are all repayable on demand at the bank’s discretion – we have come across many instances where a bank debt has been called in, leading to cash-flow problems for the business.

Many businesses feel it is prudent not to limit their financial exposure to just one organisation – in these instances The First Group have been able to offer additional, yet competitive, Leasing or HP facilities to enable new assets to be bought without impacting on your bank relationship, while enabling you to keep valuable cash in your business

All facilities arranged by The First Group are fixed-rate over a minimum term, meaning you can budget precisely for future spend up to five years in advance.

Call me now to discuss your requirements.

Steve Murgatroyd

The First Group
The Brewhouse, Old Bexley Business Park
Bourne Road
Bexley
Kent
DA5 1LR
Tel: 01322 621999
Mob: 07776 145034
Fax: 01322 621998
e-mail: stevem@thefirstgroup.co.uk