What is a finance lease?

A finance lease is a type of commercial lease in which the legal owner of the asset — in this case, a tractor — rents the asset to the user of the tractor for an agreed-upon period. When a lessee enters into this agreement, they have full operating control of the asset. They will have responsibility and assume the risks and rewards that come with owning the asset. For accounting purposes, the lease gives the lessee the same economic characteristics as if they had full ownership of the tractor. The lessee will record the asset as a fixed asset on their balance sheet. In this situation, the lessee will record the interest of the lease payment as an expense. The lesser charges rent in exchange for lending the asset. The lessor retains ownership of the asset but the lessee gains exclusive use of the asset (providing they abide by the terms of the lease). The lessee is obliged to make rental payments that cover the original cost of the asset. There is an obligation to pay all of the fixed rental amounts, sometimes including a percentage of the purchase price of the vehicle at the end of the contract.

What is an operating lease?

An operating lease in contrast is the simplest form of equipment leasing, where the customer doesn't take on the risks and rewards that come with owning the asset (such as maintenance costs). An operating lease or contract hire is a way of renting an asset for your business over a short or medium time frame without taking on any risk. With an operating lease, you can get a tractor hire over a fixed term, with lower monthly payments and without the commitment of ownership.

Indie Brands

1 December 2019

"Funding Options basically took all the hassle out of it. We've now been able to expand the company to a point where the next step for us will be to bring in investors over the next year."

Unsecured peer-to-peer loan

Food and Drink

Founder and MD of Indie Brands Doug Cunningham was looking for a loan to boost the business's growth, but his bank couldn't help — we found his fast-growing company the right lender to help finance the expansion. We helped the premium spirits distributor get the unsecured peer-to-peer loan they needed to fund their expansion

Indie Brands is a distributor of independent premium spirits brands, curating a portfolio for the UK's best restaurants, bars, hotels, and retailers. They decided they needed some additional working capital primarily to help fund their growth, bring on more staff and purchase more stock. When MD Doug struggled to get funding via his bank manager, he got in touch with Funding Options to see if they could help. Doug got a lot of confidence from the Finance Specialist he spoke to who made the whole process really straightforward. He was able to continue running the business whilst the Finance Specialist went off and found the best finance for him. Doug found that Funding Options took all the hassle out of the process and as a result they were able to get the funding they needed to expand the company. The additional funding has allowed Doug to get Indie Brands into a position where they can bring on investors.

To find out more about which business loan could be right for your business plans and needs, head here.

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Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options will receive a commission or finder’s fee for effecting such finance and insurance introductions.

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