How easy or difficult this may be depends upon the finance company involved and whether it is a finance lease or hire purchase facility. In the event of an administration if the equipment in question is on a hire purchase facility than the administrator has the right to any equity in the agreement and may take this into consideration when negotiating a purchase price for the business. If the agreement is subject to a finance lease then control of the agreement rests with the finance company. In theory the finance company can terminate the agreement, repossess the kit and sell the equipment and pocket any profit. Thankfully this doesn’t happen very often but none the less it is something that could happen.

It would therefore seem allot simpler if the agreements could be transferred or novated into the new co. Unfortunately many of the high street finance companies will not simply transfer the agreement into the new co. They have a policy of not supporting phoenix companies. There are one or two that do but they underwrite the new co as if it were a new deal so there is no guarantee. If they don’t like what they see they will provide a settlement figure and give the  business the opportunity to finance the kit elsewhere. Some of the specialist funders do not have an issue in transferring the agreement into a new co. Beware some will transfer the agreement like for like whereas others will charge full outstanding rentals and then roll this into a new co.

Not that there is anything wrong with ING Lease. Far from it. Over the last 10 years they have been without a doubt the most consistent and effeficient finance provider  in the leasing and asset finance market. However during the last eighteen months  they have been the only serious  funder. Prior to the credit crunch there were at least 4 finance companies that we could have obtained competitive finance and hire purchase facilities. They include Lombard, Barclays, Yorkshire Bank and ING Bank. All were doing extremely competitive deals in order to win your business. However as the credit crunch took hold they all withdrew their leasing facilities and were only doing deals for their very best customers. As such ING has been bursting at the seams and once a customer was at he maximum level with INGthere has been very few alternatives. The only alternative were very expensive second or third tier lenders that without a doubt would have all required guarantees irrelevant as to the quality of the covenant or asset based lenders that are only able to lend against the trade value of the kit.

Therefore having a new prime funder in the market is good news for everyone including ING. Whilst we are not expecting Aldermore to replace ING they will certainly mop up the stronger credits where ING are full. I think it will take some time before they take on the marginal deals but none the less still good news!

Although credit is hard to come by never has the benefits of an asset finance broker been more important. There are still one or two independent leasing companies in the market that can compete with the big banks. So long as there is not a massive difference in the cost of borrowing why use potential valuable credit lines for purchasing assets and equipment. In deed certain banks will not provide finance lease or hire purchase facilities under £100k preferring to provide loan facilities. Whilst you may think this is the easy option commercial loans do not have the same tax advantages of leasing. For the sake of taking a little effort now it will possibly give you massive benefits in the future.

XL Buisness Finnace is one on the countries lading asset finance brokers and with over 15 years experiance we know all the UKS fiannce companies. All have different sweet spotys and all do things inslightly differing ways . We have the experience and experetese to ensure the best possible funding solutions are sourced for your particulr business.

A print finance specialist is only interested  in the forced sale value of the kit and they will know their exit route in the event of a default situation. They will have a network of dealers and suppliers and even end users that they can shift kit onto. For a business purchasing traditional litho equipment a print finance specialist can certainly add value to any business. They are not hung up with the balance sheet of the business but are more interested in the serviceability and the security in the kit. Therefore a business which is loss making or even is a new start business may be able to obtain finance lease or hire purchase facilities. And if you have a particular press in mind they may be even be able to source a repossession or find a part exchange on another deal they are working on.

This is contrast to digital printing equipment which is viewed as having very little or no security.Therefore first port of call will be a balance sheet lender or high street finance company. providing your business has a at least three filed accounts , is very profitable and has a very strong balance sheet you will have absolutely no problem obtaining finance. Of course every single business is trading exceptionally well at the moment , NOT!  There are a few finance companies that will take a view on these sorts of deals but if they are not at the races it will be very difficult to obtain funding without personal guarantees!

In both cases the supplier will expect full payout of their invoice and therefore the hirer will be repaying the full cost of the equipment plus interest wheher it is hire purchase or finance lease.  The differing tax treatment is as follows.

With hire purchase all the VAT is paid up front and at the end of the final payment legal title passes to the customer. The equipment is shown in the customers balance sheet as an asset with a corresponding liability for the hire purchase element. The asset or equipment  is written down on a reducing balance basis and as  much as 50% of the capital cost of the equipment can be claimed  in the first year. Therefore  hire purchase may be more tax efficient in the first year especially if the business is making large profits.

With finance lease the vat is spread over the term of the lease agreement therefore from a cash flow point of view it can help businesses that are short of cash. Instead of claiming writing down allowances the monthly payment is offset in the profit and loss account and as such the full taxable benefit is obtained in exactly the same number of years of the term of the agreement. The big disadvantage of a finance lease facility is that the hirer cannot get direct title at the end of the agreement. A finance lease agreement will kick into secondary or peppercorn rentals usually the equivalent of one months payment on an annual basis. Title is usually obtained by selling the goods to a third party and retaining 90-95% of the sale proceeds.

I was with an insolvency practitioner yesterday whom had witnessed one of the worst examples of an overdraft being pulled by a high street bank. The customer had a £800k overdraft which was secured against a personal property which had approx £450k equity. The bank gave the customer 6 months to reduce the overdraft by £400k. The customer did so by increasing terms with creditors, cutting staff and organising an arrangement with the inland revenue for Paye and tax arrears. As soon as the overdraft was down at £400k the customer was called into the bank the overdraft was officially withdrawn, the business went bust, his house was repossessed and the owner /managing director was made bankrupt. Now I know this sounds a bit harsh and there are two sides to every story but these kind of scenarios can often be avoided.

If possible using a factoring or invoice discounting is always more advisable than using a bank overdraft. The facility can often provide more cash than an overdraft, it isn’t repayable on demand and it will grow with the business. Secondly where possible always use a hire purchase or leasing facility to purchase capital equipment. These are stand alone finance products and are again are not repayable on demand. Remember cash is king!!!!!!