FINANCE & LEASING

Leasing equipment can help salons to manage their cash flow and budgeting. It allows them to acquire the equipment they need and pay for it while earning money from it at the same time. This method is becoming more and more popular in the hair salon and barber industry every day!



BENEFITS OF LEASING

There are tax benefits to the salon as all payments made under a lease agreement reduce the taxable profit of the business by 100% of the charges – effectively reducing the net cost of the leasing package to the end user.

  • Leasing can also help salons to protect and reserve other lines of credit (such as loans and overdrafts) and offers a viable, cost effective alternative to these funding methods.
  • It also allows you to choose the perfect equipment and furniture for your individual salon instead of compromising on something to suit your budget.
  • You can keep more of your profit within the business and support future growth.
  • You are the owner of the furniture when you reach the end of the agreed time-frame
  • No capital outlay; Often no deposits are required
  • Leaves existing borrowing lines intact; A leasing facility preserves liquidity for other more appropriate uses.

By establishing another line of borrowing the customer maintains existing credit lines for working capital.

  • Helps cash flow forecasting; Rentals are fixed at the inception of a lease assist expense budgeting and cash

flow forecasting. This enables the customer to precisely calculate the cost associated with using the equipment.

  • Leasing cannot be withdrawn; A lease is non-cancellable unlike an overdraft, for example, which is repayable

on demand and may be reduced during a credit squeeze. Leasing companies do not review their customer’s

financial status each year and do not therefore vary limits or the interest rate charged.

  • Leasing is inflation proof; Equipment can be acquired at current prices and rentals met out of future earnings.

This means that the equipment should easily pay for itself, and the leasing rate will not increase with future

interest rate rises.

  • Leasing is tax efficient; Leasing rentals are generally tax deductible in full as operating expenses. The

customer, therefore, gets a better return on his investment by using leasing rather than paying cash for the

equipment.

  • Leasing is straightforward; Leasing minimises administrative costs and simplifies tax and accounting

procedures. Asset depreciation becomes the lessor’s responsibility.

  • Upgrade options; Leasing allows your business to keep up with changes in technology and respond to any

industry or competitive pressures. Your original installation can be altered, either during or at the end of the

lease, or to accommodate unforeseen changes.

  • Maintenance costs; On-going costs of maintenance or service packages can be included in the lease rental

amount, creating one single payment covering the equipment and service.

Example finance for a Limited Company trading OVER 3 years 

PAYMENT BREAKDOWN

Invoice Value £ 10000.00 (Ex.VAT)
Number of Payments 36
Comprising
1st Payment of £ 356.40 (Ex.VAT)
35 Monthly Payments of £ 356.40 (Ex.VAT)
Weekly Equivalent £ 82.25 (Ex.VAT)
Daily Equivalent £ 11.75 (Ex.VAT)
Tax Relief
Example of potential tax relief on the above figures :
(Tax relief calculated at 20%)
Total Payable £ 12,830.40 (Ex.VAT)
Tax Relief £ 2,566.08 (Ex.VAT)
Net Cost to Business £ 10,264.32 (Ex.VAT)
Tax Benefits are dependant on your circumstances and this example is for illustrative purposes only.
To ensure you qualify please seek financial advice.

 Example finance for a Limited Company trading under 3 years 

PAYMENT BREAKDOWN

Invoice Value £ 10000.00 (Ex.VAT)
Number of Payments 36
Comprising
1st Payment of £ 392.00 (Ex.VAT)
35 Monthly Payments of £ 392.00 (Ex.VAT)
Weekly Equivalent £ 90.46 (Ex.VAT)
Daily Equivalent £ 12.92 (Ex.VAT)
Tax Relief
Example of potential tax relief on the above figures :
(Tax relief calculated at 20%)
Total Payable £ 14,112.00 (Ex.VAT)
Tax Relief £ 2,822.40 (Ex.VAT)
Net Cost to Business £ 11,289.60 (Ex.VAT)
Tax Benefits are dependant on your circumstances and this example is for illustrative purposes only.
To ensure you qualify please seek financial advice.