If your farm needs commercial vehicles or plant and machinery, what's the best way to finance them?
Traditionally, many farms have used a farm loan or hire purchase (HP). However, there is a growing awareness that these may not always be the best options. Leasing is a highly flexible way of acquiring the assets your business needs. It allows you to preserve working capital by financing farm equipment over the course of its cash-generating life.
Leasing can involve lower deposits and lower monthly payments than loans or hire purchase. It also gives you a new line of credit, totally separate from everyday business banking and overdraft facilities.
For certain assets, including technology, you can benefit from a full life cycle management service, including sourcing, maintenance and disposal.
UK farming contributed £5.6 billion to our economy in 2006. It uses around three quarters of this country's land area, and employs over half a million people. Further details on the farming economy can be read at the DEFRA website
How does it work?
Like loans or HP, you make regular payments over an agreed term. The monthly rentals and lease period can be tailored to suit the needs of your business. With leasing, you do not own the assets they remain the property of the leasing company. However, you will enjoy most of the benefits of ownership, including the right to sell the equipment at the end of the lease and retain the majority of the proceeds.
Leasing - the key benefits:
- Working capital preserved, payments spread over the life of the asset
- Allows equipment and plant to be updated as old assets need replacing
- Fixed monthly costs for greater control of cash flow
- Rentals can be offset against your taxable profits
- Flexible end of lease options
