Asset Finance For Your Factory Project – What Are The Pros & Cons?
8 August 2022
Building and fitting out a new food factory represents a major investment for your business, so you’ll be planning carefully to ensure you get the most from your available funds.
There are generally three finance options for consideration when looking to upgrade your food factory: cash, bank facilities OR lease finance.
Lease my food factory fit-out project? Yes, really! Most businesses would not think twice about leasing items such as company vehicles or IT, these are well established and trusted methods of finance. The same principles and benefits also apply to leasing your fit-out project, although most business owners assume it’s not an option due to the nature of the asset.
Leasing is a smart method of finance that allows you to ‘rent’ your project and offset the payments against taxable profit. You can pay over 3, 4 or 5 years to suit your budget and the lease on your building.
Anyone who runs a business can lease, from start-ups or small SME’s to limited companies and PLC’s. Leasing is a very popular method of financing business equipment. It is estimated that 98 out of the UK’s top 100 companies lease capital goods.
The Benefits of Leasing
1 Payments are 100% tax allowable
If you lease your factory fit-out project, payments are 100% tax allowable which means they can be set against company profit. It is the only way a project can be fully offset and makes leasing the most tax efficient method of financing your factory fit-out project. It can even work out cheaper than paying cash!
2 Fixed payments for accurate budgeting and forecasting
Unlike other methods of finance such as floating rate bank loans and overdrafts, payments are fixed for the duration of the lease period allowing you to budget effectively and with certainty. It also provides you with a hedge against inflation.
3 Get the right solution now
By spreading the cost over 3, 4 or 5 years you can acquire the solution that fully meets your needs now, rather than being restricted by your current capital budget.
4 Ease cashflow
In most cases we can arrange a lease facility with no deposit, having little impact on your cash flow.
5 Preserve borrowing power
Leasing means you preserve your existing bank credit lines, without compromising future working capital, leaving them available for future business development or investment purposes.
The Drawbacks of Leasing
There aren’t many drawbacks to leasing, but a significant obvious one is there is a cost to leasing versus paying cash or using a bank loan. However, the costs can be negated by the specific tax benefits and in the current economic climate, there is an additional benefit – In an uncertain economy where inflation and interest rates are on the increase, leasing comes into it’s own. It’s the only method of finance where payments are fixed for the term, so effectively your monthly cost ‘reduces’ as inflation grows.
As one of our customers put it last week ‘I got my finance from you at a snip – when I look at what’s going on around me’.
Partnership With a Specialist Leasing Company
We work in partnership with Plus Finance Ltd, a company which specialises in arranging finance for customers undertaking large projects. They are the UK market leader in this particular arena and their team has over 25 years’ experience. They will work with you, in conjunction with us, to achieve the most cost effective and tax efficient way of financing a brand new food factory fit-out.
Many clients don’t realise leasing is an option for this type of project so if you would like further details, please don’t hesitate to contact Plus Finance on 01494 783773 or email email@example.com or take a look at the website here
Visit our stand (E72) at the PPMA Show!
We are excited to announce that next month we are exhibiting at the Foodex Manufacturing Solutions 2023 show!
What does the construction phase of a turnkey project look like?
If you are confident in our turnkey approach and happy with the design, we can then proceed with the building and fitting out of your new food factory according to the detailed design. This enables you to completely step back from the project, allowing you to focus on running and growing your business, knowing it’s in safe hands.
The importance of aligning food certification requirements when planning and designing the build of a new factory facility
If you don’t think turnkey is the correct route for your upcoming expansion project, you will need to bear in mind who will take on the role of principal designer and contractor. This is an important factor as this will expose you to risk including ensuring your new factory facility is built to the requirements of necessary food certifications such as BRC and SALSA.