UK equipment purchases may be affected by 2006 tax reforms that could disallow certain forms of leasing for new equipment. In line with this change, Lloyds TSB Corporate is offering operating leases that allow manufacturers to install and run new equipment while title – and risk – remains with the bank. The leases will be individually structured, and available via the bank’s mid-market corporate asset finance (CAF) division.
“Operating leases are a big boon to financial planning, allowing manufacturers to expand organically rather than by raising debt against their assets,” says Mike Chappell, head of CAF at Lloyds TSB Corporate. “They mean not only a low initial outlay, but fixed lease rentals during the contract and no ownership risk for the company.”
CAF’s UK regional presence – in Birmingham, Leeds, Glasgow and London – will allow such bespoke versions of these leases to become available to a much broader market than was previously possible.
“We noticed that even large corporates were being forced to cherry-pick between a disparate range of financial products and providers for their middling procurement needs,” explains Chappell. “What was really needed was a “one stop shop “that combined the financial muscle of a bank with the attention to detail of a smaller, specialised leasing shop.”
CAF claims to have achieved this by combining its regional sales offices with the “big-ticket “structuring techniques developed by the bank’s structured asset finance division based at the corporate bank’s City of London office.
“The regional CAF network was set up a year ago, following a consultation exercise that showed those asset buyers with more everyday equipment and capex needs were being overlooked by banks “main leasing divisions,” says Chappell. “Following a year of great success with finance leases, we have extended the offer to operating leases – also leaving our clients best positioned for the coming tax reform.”
The new corporate tax rules will restrict the availability of the capital allowance on new equipment to a company that can demonstrate it will be left with the “residual value risk “attached to depreciation in the asset’s value through use or obsolescence affecting its future resale value. Banks such as Lloyds TSB Corporate are therefore gearing up to be able to own and manage large asset portfolios in their own right.
“The key to competitive pricing on the new CAF operating leases will be the expertise the underlying future market value of new equipment,” says Chappell. “To this end, Lloyds TSB Corporate has gathered an extensive equipment management team of sector specialists to work alongside both the relationship managers and the clients themselves, ensuring all equipment value takes into account present and future market conditions.”