Raising funds for a relocation or refurbishment project is no simple task. In fact, it can feel like a full-time job. Fortunately, whether you’re looking to develop, redesign or purchase commercial property, you have an excess of options available.
Firstly, however, you’ll need a strong argument for why you’re undertaking a fit-out in the first place. Is your workplace preventing your company from remaining competitive? Is the office affecting your brand, staff recruitment and retention?
By understanding your essential objectives, you ensure your investment is successful and, should you require funding, your aspirations send a strong message to potential finance companies of your requirements.
Leasing is a popular option for other high-expense business investments (think company cars, software or cloud services) but did you know you can utilise this service for your office fit-out too – from design and construction through to your furniture and IT specifications?
Leasing itself comes in many forms, so it is worth bearing in mind that there is even a degree of flexibility in the kind of lease that might be best for you. Typical terms are 2-5 years with 5 years being the most popular.
Finance Leasing is the most popular form of leasing as it is extremely tax-efficient, the lease is 100% tax-deductible, and can cover all of your expenditure, not just the assets. You get to spread the costs over the term of the agreement, including the VAT, and you have a great deal of flexibility at the end including the option to keep the assets indefinitely for a final one-off payment.
Also known as “hire purchase”, you make payments over a fixed period, at the end of which the asset becomes yours subject to paying a final Option to Purchase (OTP) fee. Treatment is very similar to using capital (similar from a tax perspective) including the need to pay the VAT in full upfront.
The bank takes “risk and reward” by setting a residual value (RV) in the assets. Popular in the past as the only form of leasing off-balance sheet, changes to accounting regulations have changed that but, for some, the lower repayments of an RV lease can be an important cash flow consideration.
Bank loans are one of the most common sources for construction financing, though they are often used for smaller projects, usually up to £3 million. In these instances, you’ll work directly with your bank lender, who will manage the financing project alongside you.
You may decide that you have the cash flow to cover the entirety of the design and construction work upfront. It is worth discussing your cash flow with your fit-out partner as flexibility can often be built into the project to ensure you do not feel any significant financial strain.
In amongst leasing and paying upfront is using a combination of these methods to ensure you receive the best value for money. You’ll want to consider the product and service in which you’re investing.
A good example of hybrid involves using capital for some or all of your Annual Investment Allowance (AIA) where you can benefit from 100% tax allowances and then leasing, especially finance leasing, for everything else to maximise your tax position.
In most cases, your entire fit-out or refurbishment can be financed, these items include:
The good news, if you are considering leasing, is that our independent specialist, and leading provider of interior finance, Bluestone Leasing is on hand to assist. They provide access to over 65 specialist funders (many not accessible directly) and secure the very best commercial terms for your project. An impressive 92% of their applications are successful and their multi-award winning team will handle everything for you.
If you’re looking towards other finance options, employing a strong team of project designers and planners can make all the difference, ensuring you create a detailed and accurate plan of action. In your application, you’ll need to consider:
We hope this has provided you with some insight into your potential options. If you would like to learn more about financing, get in touch to find out more!
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