Operating Lease (off balance sheet)
Operating Lease (off balance sheet)Our asset finance service allows any business or commercial organisation to obtain the use of a capital asset without the cost coming out of the bank account at day 1. Frequently the asset will be able to pay for itself by earning profits or reducing costs so that the effect on your cash flow is actually positive rather than negative.
Different types of agreement are available to suit the different types of asset you may want to acquire and the way you want to schedule the payments.
If your requirement is only to use the equipment for a defined period rather than acquire it, an operating lease (which is in effect, to a simple hire agreement) may be appropriate for you. As opposed to a finance lease and lease purchase, you have limited responsibilities for the equipment whilst you use it and the economic risks are retained by the lessor. It is most commonly used in situations such as fleet hire, vending-machine hire or the like.
Unlike a finance lease or lease purchase, an operating lease will appear on your profit and loss account as a trading expense rather than a balance sheet item.
To qualify as an operating lease the lessor must build in a significant residual value and whilst this results in lower payments during the primary term the asset has to be sold at the end to recover the residual.