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Cash flow issues lead to boost for leasing

Cash flow issues lead to boost for leasing

The company, which leases everything from photocopiers to aircraft, said that a large proportion of recession-hit businesses have seen their traditional bank funding provision restricted and are now looking at ways to manage costs and free up capital resources. As a result, they are being forced to take a new look at how they acquire the equipment they need.

Marie Dunkley, commercial leader at GE Capital Solutions, said: “Businesses are being put in a position where they have no choice but to re-examine their normal method of acquisition, usually looking to alternatives to outright purchase as their traditional lines of funding have reduced or have been closed.

“This rethink is very much to the benefit of leasing for a number of reasons, the most important of which for most businesses is the way that it allows them to maximise cash flow; something that is clearly becoming a key issue for many during the recession.”

Another factor helping to increase the favourability of leasing, according to the company, is the decline in the value of secondhand equipment. Fewer businesses want to take on the risk of decreasing equipment residual values and are looking to leasing companies to take on that risk on their behalf.

Dunkley continued: “Avoiding the residual risk has always been a key benefit of leasing, but is now becoming even more essential in these uncertain times.”

A further attraction for businesses looking at leasing, she added, is that assets do not need to appear on a company’s balance sheet, effectively reducing the level of company debt to allow the freeing up of additional lines of credit.

She said: “Businesses need to actively manage their balance sheets in order to gain access to the often very much reduced level of funding that is now available to them, and leasing allows them to keep these credit lines open.”