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.

Stuart Lawson

Chief Commercial Officer

Stuart is Chief Commercial Officer at Funding Options where he plays a key role in driving the growth of the business and its relationships with more than 120 partners. A finance industry veteran, he has a strong background in alternative finance, corporate and commercial banking, as well as global transaction banking.

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Education

How to register a limited company - checklist

There are numerous benefits associated with registering your business as a limited company. For instance, incorporating can help you build brand credibility and protect your personal assets. The process isn’t as long as it used to be and can take just a few hours. When you’re ready to register your business as a limited company, you’ll have to submit an application form to Companies House via the HMRC website. You can also download the form in PDF format and submit it manually. Some people decide to use a third party (such as their accountant) to process the application. Either way is fine! The following checklist will help you prepare the information you need to complete the application process smoothly.

15 Dec 2020

Press

Nearly 3 million UK small businesses struggle as Brexit bites

Research by Funding Options, the UK’s leading business finance marketplace, has revealed that half (51%) of UK small and medium business1 owners need more help to take control of their finances – equating to 2.86 million small businesses who are struggling alone.

18 Oct 2021

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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 may receive a commission or finder’s fee for effecting such finance and insurance introductions.

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Funding Options Ltd is incorporated and registered in England and Wales with company number 07739337 and registered office at 4th Floor The Featherstone Building, 66 City Road, London, EC1Y 2AL.

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Stuart Lawson

Chief Commercial Officer

How to register a limited company - checklist

Nearly 3 million UK small businesses struggle as Brexit bites

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