TO RENT OR BUY EQUIPMENT? THAT IS THE QUESTION…

When it comes to growing your business, one of the biggest financial decisions you are required to make is whether to invest in your assets/ equipment or rent them to lessen a potential impact on the company’s cash flow.

There’s several considerations that should go into the decision; maybe you have secured some big contracts in the pipeline and need the machinery, perhaps you’re looking to invest in your company’s capabilities or maybe you just need to update some of your current equipment or test new markets.  Whatever your reason, there are pros and cons to both sides. So, how do you choose which method is financially right for you and your business?

Here at PFC, we’ve put together a quick guide of things to consider when going through this process;

  1. Current financial situation

The first question to ask is does the business have the capital available to buy? If you are a small company and opt to purchase a big-ticket item upfront, it may affect your cash flow and that’s why it’s important to research all your options carefully or consider a loan if the equipment brings a greater return than the investment.

Although buying may be a larger one-time financial outlay, the cost of renting can add up quickly, and over a long period of time can end up costing you more.  It’s also worth remembering that when you own, the asset does retain some value that can be drawn upon if required or when resold.

  1. Effectively estimating the cost

When estimating the cost of buying vs financing, it’s important to ensure you have considered the other associated costs that come with owning equipment. Make sure you take into consideration maintenance, operating costs, insurance as well as and potential licensing.

Renting is generally an inclusive cost, but given that a rental company must turn a profit, you should consider that your rental fees will include the purchase price and the cost of ownership, both marked up. You will also more than likely have to pay to transport the equipment to and from the rental store as well, every time you use that equipment.

  1. Length of project or job frequency

The length of your projects or the frequency, could be the most important factor when deciding.

If the job is short term job, or you need a specialised piece of equipment for a one-off job, then renting makes more sense. The risk, of course, is that if the machine isn’t being used for the entire time, then you’re spending money on a machine that’s sitting and waiting, not making you money.

If you’re working on a long project, or if you’ve got several jobs on the horizon, then buying probably makes better sense given that rental costs add up quickly the longer a job goes on. If you can purchase a multi-purpose piece of equipment (scaffolding, loaders, excavators, skid steers, forklifts, trucks etc.) that can be used for various projects, this makes a great asset on any jobsite.

Below is a table the highlights some of the key points:

Renting Buying
 ✔ Lower initial investment

✔ Access to a broader range of equipment at all times

✔ Latest equipment usually offered

✔ Maintenance, insurance etc. handled by another party

 ✔ Cheaper over the long term

✔ Get a return on your investment when you no longer need the equipment

✔ More flexible — equipment available whenever you need it

✔ Less downtime

✔ Possible tax advantages

✔ Ability to rent out equipment in downtime and make money from it

✔ Appear reliable to clients when you already have the equipment to take on their job

Whichever method you feel fits your business best, there are cost implications for both and the team would be happy to discuss financing options for both. Next month’s blog will also explore the different finance options available to your business.  To discuss with PFC, how we can help with your finance options, give us a call on 01829 738 799.

THE ROUTE TO FINANCE

For start-up businesses and SME’s, it can be tricky to convince lenders to grant you funding especially if your business hasn’t taken off the ground just yet or if you’re fairly new to the business and are already looking to expand. Often, if the principal bank does agree to finance the business, they will look to bolt-on far reaching security comprising debentures and will sometimes only agree to the finance if they can dilute their own funding with any of the available grants that exist for small to medium sized companies. This is very time consuming and laborious and certainly doesn’t help the client if they need fast access to decisions and finance.

We’re here to provide you with access to finance where others may say no. Together we can decipher what your best financing option would be, so that we can then put it forward to our panel of more than 45 lenders to find the best solution for the individual or business.

With our many available routes to finance you may never need to go to your bank again to ask for specific funding. PFC very rarely fails in successfully sourcing finance for our clients.

We listen to every business and we look at the size of your company, the owners and how much you have estimated that you want/need to borrow, so that we can work out ideal repayment terms and identify types of credit available.

In 2017 we have arranged an eclectic mix of funding already, for small sole traders up to multi-million turnover incorporated businesses.

Five and six figure VAT and tax loans (incredibly useful for ring-fencing essential cash within the business), single invoice finance (a few of our clients have provided current outstanding invoices which we have been able to get funding against to inject working capital into the company but without the need for entering into long term invoice financing), personal loans (many small business owners find this an ideal and competitively priced method of introducing capital into the business), asset finance (commercial vehicles, scaffolding and IT are some of the equipment we have arranged asset finance for so far this year), invoice finance and inventory funding (large major restructuring for a plant hire company, we were able to instruct a top-tier panel funder to roll out a new invoice finance package supported by a funding line for their stock) and many working capital loans.

In most instances, with a couple of items of supporting information (management accounts, last full filed accounts, and perhaps a few months business bank statements) we can propose to our chosen lender and obtain the approval within a few hours – this means from proposal to funds being paid out can be completed in as little 48 hours, and occasionally in the same day, depending on the type of finance applied for.

If this all sounds too daunting, don’t worry. You can always call us to walk you through the process and assist wherever possible along the way. If you’re thinking of borrowing to improve your business be it a small refit or a full-scale expansion, don’t hesitate to give us a call on 01829 738 799 or send us an email: enquiries@pfcfinance.co.uk.

Don’t pay the penalty, pay the bill

Are you likely to have to pay a penalty to HMRC because you can’t afford to pay your corporation tax bill on time? If so, you aren’t alone, according to Funding Option business owners were unable to pay their tax bill on time in the 2014/15 tax year and the HMRC took 1.8 billion in late payment fees.

The same company has also estimated that the amount owed in late payment fees is likely to increase again for the 2016/17 tax year too.

The possible rise in the already-steep figure could be down to the rocky economy around the time of Brexit. 2016 wasn’t the most financially secure year for a lot of businesses due to the economic uncertainty which in turn may have a knock-on effect with some struggling to pay their tax bill again this year.

The HMRC state that you must pay your corporation tax 9 months and 1 day after the end of your accounting period which is normally at the end of the financial year. Some companies may have two accounting periods within the same tax year as accounting periods depend on when your business was set up.

What’s more, the HMRC has been clamping down on late corporation tax payments with not only penalties but the seizure of assets as well. This is causing cash-flow problems for many SME’s who have been hit with a penalty. That’s not all, over the past five years’ banks have been cutting SME’s overdrafts too, causing further cash flow problems for small businesses wishing to access finance to pay their tax bill.

So, what other options are there for businesses? Luckily, PFC provide a range of alternative funding routes for businesses to choose from:

Refinance Assets – This is a form of lending that allows you to borrow against your tangible assets, from vehicles to equipment, even IT and office furniture can be refinanced to provide essential capital.

Invoice Finance – A method that helps to improve cash flow by allowing you to borrow money against any unpaid invoices you may have. We work with the UK’s leading Invoice Discount funders, with expertise in all sectors. We can also offer funding against single invoices if you don’t want to commit to full invoice finance.

Tax Funding – An option that’s available to every type of business, whether it be self-assessment, corporation tax or partnership. This funding option is available in fixed terms from 6 to 12 months.

Whatever your needs, PFC can arrange five, six and seven figure funding for VAT and tax bills for sole traders up to multi-director businesses. With access to a panel of more than 30 lenders, PFC can provide access to finance where banks may fail. For more information visit: https://pfcfinance.co.uk/sme-finance/ or Contact us directly on: 01829 738 799.

New Year, New Credit – Getting a fresh financial start

After months of gift-buying and festivities, the Christmas cheer is slowing down. Unfortunately, for most of us, that means putting down the mulled wine and returning to the 9 – 5 lifestyle.

As everyone knows, with New Year comes New Year resolutions. For some, it may be sticking to a strict, no junk food diet, or increasingly your weekly exercise regimes, but for the business owners amongst us, our resolutions may be more finance focused.

Whilst the economic burden of Christmas may be over, upcoming finances cannot be ignored. With the January HMRC online tax return deadline looming, as well as any outstanding company payments, it’s time to sit down and work out the maths.

Whether 2016 proved to be prosperous or unsuccessful will vary from business to business, but regardless, 2017 offers the opportunity for a fresh start. Through organising your finances prior to the New Year, every business will know where they stand in terms of profit and funding objectives. With this in mind, by this time next year, you can look back knowing that all your hard work has paid off.

At PFC, we understand that finance is not so clear cut and that organising your finances may be more stressful than creating a simple spreadsheet. However, we also understand the ways in which easy, flexible finance access can transform a business, which is why we’re here to help your enterprise start afresh. With a number of different financial schemes, we can ensure that 2017 will start as it means to go on.

From asset finance and commercial loans to invoice and inventory finance we provide a range of finance options to suit everyone, and with a team of dedicated lenders, we promise that each individual will receive a scheme tailored to their specific needs. Having worked with every sector, no financial problem is too overwhelming for us, and the success of our services has been evidenced time and time again.

If you need a fresh financial start, then get in touch today. We can provide fast, flexible and competitive rates from an unrivalled lending panel, comprising many of the top tier funders and niche specialised SME lenders, that all starts with a simple email. We’re here to help. Start 2017 with a new financial outlook, so that your business can grow to its full potential over the course of the next year.

How Invoice Financing Can Improve Cash Flow

It’s one of the main issues that B2B suppliers face, particularly SMEs and sole traders. When a product or service is supplied to another business and an invoice raised, there is generally a delay before payment is made. It can take on average 30 days before funds return to your business and can be reinvested, used to cover running costs or get more product out into the marketplace. In many instances, especially when in partnership with large corporations such as supermarkets, this invoice payment delay can be anything up to two to three months.

That’s a long period when valuable cash flow is stalled.

Obviously, this situation causes problems for small and medium sized businesses working on tight or limited budgets. Invoice financing is designed to help companies get over this problem. When an invoice is raised, financing can be taken out to provide immediate payment, rather than having to wait until the invoiced company pays up. Once that invoice is fully recovered, the loan is simply paid back.

Cash flow is important to all businesses but more so to SMEs and sole traders who generally have to compete within tight margins. Getting the right invoice financing in place to ensure that money is available when a business most needs it is part of accepted operating strategies nowadays. That means a business isn’t left on hold while they are waiting for payment to be received. They can implement growth strategies and deliver more products and continue to thrive rather than treading water and twiddling their fingers while the client account department hangs onto that invoice.

For business to business companies that rely on a flexible cash flow to compete in their markets, invoice financing is the perfect solution for the immediate release of finances. It allows them to introduce working capital, pay wages and focus more on the future.

At PFC, we have access to a range of funders and can provide invoice financing to businesses across a wide spectrum, from those that have been operating for a while to start ups that have less of a credit history. It’s not just about providing loans to cover these payments, allowing companies to continue to operating effectively. It’s also about building strong relationships that are designed to deliver the financing options many SMEs and owner managed sole traders are looking for to make their businesses more competitive.