We know that deciding how you will pay for your project will be top of your priority list. While paying upfront in cash is certainly an option, many of our customers choose to pay via finance, spreading the cost over time.
We spoke to Louise Harris and Nichola Hawkins from our finance partner, Bluestone Leasing, to talk us through the most common questions and concerns that businesses raise when deciding whether to finance their project or pay in cash.
Why would customers use finance to pay for my project if they have enough cash?
There is a misconception that companies only use finance if they are short on cash; in reality, 8 out of 10 accounting firms, government bodies and 85% of the Times Top 100 companies all use finance, so you will be joining good company.
Why do they use finance? Finance has many benefits including tax efficiency, spreading risk, matching the cost of assets with ROI and, most of all, keeping all-important cash in the business.
Is paying via finance more expensive than paying in cash?
Paying via finance does involve paying interest (with rates typically falling between 3-10%) but this needs to be weighed against the financial benefits that financing can unlock. For example, many are able to access significant tax savings, and the cash that they are able to keep hold of can be invested in the others areas of the business to increase profits.
With a newly transformed workspace, state-of-the-art technology and other assets, you can attract and retain the best talent, streamline efficiency, increase productivity, and take your brand to the next level.
What can be included in a finance agreement?
A finance agreement can be tailored to include lots of different elements from the tangible assets such as furniture and IT equipment to labour costs, paint, and even the dilapidation costs of old premises. The total costs of the project can be rolled into one agreement so you only need to make one payment every month or quarter.
What’s involved in the finance application process?
Our job is to make the application process as quick and straightforward as possible, to take on the hard work and guide you through your options.
Applying for finance usually begins with a conversation between you and a Bluestone account manager. We will meet with you either in person or virtually to discuss your business, your project, and any relevant plans for the future that we should consider when arranging finance for you.
We will run some credit checks to ensure that finance is the right choice for you. We can then put together a bespoke financial solution; this might include more than one type of finance and/or multiple funders. When we have secured the finance, you will have the opportunity to read through all the documentation and terms of the agreement before signing the contract.
What happens if a business doesn’t have great credit – will they still be able to get finance?
It is important to note that having poor credit will not necessarily prevent you from accessing finance, as we have access to more than 50 lenders all of which have different acceptance criteria and preferences in terms of what they want to fund.
What about the small print – will the finance contract contain any hidden clauses?
Bluestone Leasing only transact business using clear, easy to read contracts regulated by the Finance and Leasing Association (FLA) and approved by the Financial Conduct Authority (FCA). We make sure all our customers understand the agreements they sign.
Does the customer have to pay a deposit upfront?
Any payment structures that AMH require can be facilitated, so the client can spread the cost and only make one monthly payment as their first outlay. Your account manager will work with you to create a bespoke finance solution that is highly cost-effective and tax efficient.
How long would a typical finance agreement be?
Finance deals can be arranged over a term to suit your needs, subject to the assets and type of project in question. For example technology assets are typically financed over 3-5 years whereas plant and machinery could be significantly longer. Alternatively, finance leases could be as short as one year. We can advise you as to the most appropriate term for your specific needs.
What happens at the end of a finance agreement?
Just as there are several different types of finance agreement, there are several ways that a finance agreement can come to an end. Your Bluestone Leasing account manager will go through all aspects of the agreement with you to ensure that you fully understand its terms.
What’s the Super-deduction tax benefit?
As part of their response to the economic impact of the COVID-19 pandemic, the government has introduced the Super-deduction tax benefit.
Prior to the Super-deduction, under the Annual Investment Allowance (AIA), companies could deduct 100% (up to £1 million) of the cost of “plant and machinery” from their taxable profits. Under the super-deduction, between April 2021 and March 2023, companies paying corporation tax can deduct up to 130% of the cost of new assets from their taxable profits.
According to the government, “Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances”, and the super-deduction still applies if assets are purchased via finance, as long as certain conditions are met.
So, whether investing in a new workspace and associated assets using cash or finance, the Super-deduction could deliver significant savings for many businesses.
When is the best time for finance to be discussed?
The earlier that finance is discussed with your design and build company, the better. They will put you in touch with us so we can work out how much finance you might be able to access, which elements of your project can be incorporated into the deal, and any tax savings you could take advantage of. With all the information at your disposal, you can decide whether to finance your project or pay in cash.