Business Finance Tips...

Please excuse the blatant website plug, however, I have recently added a blog entitled "10 Tips to consider when signing a finance agreement".

This is because of the many hidden extras that funders include in their finance agreements, which can significantly increase the overall cost of the clients borrowing.

I am more than happy to offer free advice to members who are currently considering their finance options.

The blog is here:- http://www.thebosscorporation.co.uk then click on the blog page.

Re : Business Finance Tips

Some interesting stuff there... thanks!
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Re : Business Finance Tips

Could you post the ideas here... I'm a little lazy to click through Mike!

Re : Business Finance Tips

No problem Chris:-

We have often seen clients coming back to us for funding, having been tempted by offers from other companies, which aren’t quite all they seem.



Therefore, we have put together a list of 10 basic tips that should always be considered:-

1. When comparing quotes from different lenders, always ensure the payment profile is the same, ie. number of payments paid upfront, as this affects the rate greatly.

2. Always keep a record of when the first and last payments are due to be made.

3. If the agreement is a finance lease, write to the funder / broker three months before the end of the agreement confirming your end of term wishes.

4. With any finance agreement, always ask the lender to confirm the end of term title fees in writing before you sign the agreement. Make sure there are no other “Residual” or “Balloon” payments due by you

5. When comparing rates, compare the total amount of interest payable. Different lenders have different methods to calculate their published rates.

6. Due to the considerable tax benefits, leasing can work out cheaper than paying cash.

7. Always ensure the schedule of equipment matches that of the equipment you are buying.

8. Brokers can save you time and money as they have access to a number of lenders and often can obtain better rates than single customers.

9. Leasing makes it easier to keep pace with technology - Most Leases have built in upgrade paths meaning you are able to keep up with technology, without always increasing your monthly payments.

10. Always ensure that you send the funder your insurance details to avoid them adding a premium to your monthly rentals.

Re : Business Finance Tips

Now you have no reason not to read it Chris - haha!

Dan
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Re : Business Finance Tips

Number three is especially important, particularly if it is on a minimum period rental. Unless the client remembers to terminate at the end of the term, the funder will continue to collect monthly repayments as part of the secondary period.

I have just come across a client who arranged a lease with a funder themselves in 2002 for 2 years, they have since paid over £20,000 in secondary period rentals as they didn't realise!

Re : Business Finance Tips

As someone who always (so far!) deals in relatively low value payments I've never really come across this sort of thing.

Would someone mind explaining why someone might want a finance agreement and what it does... is it something to do with reducing risk for one of the parties in a contract?

Tim

Re : Business Finance Tips

Thanks Mike, usually people post a promo and then disappear for ever, so nice to see someone actually take the time to check back on their post!

Chris

Re : Business Finance Tips

No worries Chris, though it did link to our site, I was trying to give some helpful information as well!!!

Tim, with your question, are you asking why a client would ever want a finance agreement, or why a vendor would want to offer their clients a finance option?

Re : Business Finance Tips

Hi Mike - Both of those things, I'm sure it's obvious but not being financial or from a big business background I'm struggling to say why it might be useful?

Tim

Re : Business Finance Tips

OK, the key advantages to the supplier of offering a finance option are as follows:-

* Shorter sales cycle - By offering a monthly payment option, this bypasses many budgetary constraints and speeds up the approval process.

* Increased sales - The supplier will win more business simply by making the product easier to buy. Also as the product(s) is more affordable, the client will often buy more in one go, rather than phasing projects over a long period of time.

* Increased margins - As the emphasis is taken off the cash price, the client is less likely to ask for a discount.

* Faster Cash - Typically the supplier will be paid within 24 hours of delivery / agreed sign off time, as opposed to having to wait 30/60/90 days.

* It's just another option for the client, to enable them to say yes!



The main benefits to the client are:-

* Tax Benefits - Under a Lease, payments are 100% allowable against taxable income (both capital and interest). This often results in the net cost being cheaper than paying cash. Hence the reason why so many large, cash-rich clients lease their capital equipment.

* 100% Finance - No deposit is required

* Unsecured lending - The client doesn't need to provide any additional form of security such as personal guarantees etc.

* Additional Credit Line - Allows them to keep their bank facilities free for other core business uses.

* Title payment - The client still takes title at the end of the term, so they have all the tax benefits of leasing, plus ownership at the end.



That's the basics, but if you need any further information, do let me know.

Re : Business Finance Tips

Cheers Mike!