Leasing and Factoring: Financing Growth
The order books of German companies are full, the earnings position has brightened considerably in many sectors – exactly the right time to invest in new machinery, vehicles or up-to-date business equipment to strengthen competitiveness and increase the order volume even further. As regards the financing of these plans, leasing has an attractive advantage over investment loans. A case study from our daily business makes this clear.
Deciding on Leasing
A work platform renting company wants to exploit the positive business climate in the construction and service sector to expand its inventory. It decides to acquire two more work platforms. The first step is to find the right form of financing. The company owner feels that the route via the company bank is not suitable, as the work platform industry is very capital-intensive and subject to high investment costs. However, it is particularly important for small and medium-sized companies to pay attention to their equity ratio. Unlike a bank loan, an off-balance leasing agreement conserves equity and usually requires no additional collateral, as the terms of the agreement are adjusted in line with the value development of the leasing object. The regular payment of leasing installments creates a clear calculation basis for the duration of the leasing agreement. Seasonal installments, for example taking slow periods in winter into consideration, can also be incorporated into an installment plan drawn up in accordance with the company’s individual course of business. The flexibility convinces the prospective lessee and shows: leasing is a flexible instrument for dynamic entrepreneurs who focus on use rather than ownership.
Choosing the Right Partner
There are approximately 2,000 leasing providers in Germany. How do you find the right partner? Years of experience in the sector and the outstanding object knowledge which goes with this experience are indispensable for the potential lessee. The work platform leaser therefore decides to attend the Platformers’ Days, the industry’s most important trade fair in Germany, in order to find out about market innovations, also in the financing segment. He finds what he wants at the stand of Universal Leasing, which is a subsidiary of the GFKL Group. Founded in 1968, the company is one of the pioneers in the German leasing market, and has been financing work platforms for 20 years already.
Individual Offer
GFKL Group is a non-captive leasing provider, working independently of banks and manufacturers alike. Universal Leasing can therefore choose the fitting product for the work platform leaser from all the products available on the market. This applies not only to new equipment, but also to used items, which can also be leased. At the online marketplace www.marktplatz-arbeitsbuehnen.de Universal Leasing posts current offers and accepts financing inquiries. To his surprise, the prospective lessee learns that he could have even received a fast financing decision directly at the company’s stand during the Platformers’ Days. A USB stick with the relevant business documents would have been sufficient for the inquiry. However, no problem: GFKL has a nationwide network of offices in the leasing business. During a meeting at the prospective customer’s premises, the GFKL Group’s leasing specialists draw up a customized offer for the lessee.
Fast Credit Decision
The automated credit information and decision application which has been developed by GFKL itself ensures short processing times for client inquiries. Generally, the decision is made considerably faster than in the case of credit applications through the company bank. This is also true for the work platform leaser. Furthermore, GFKL orders the two new work platforms for the lessee on the very day the agreement is concluded.
Factoring as the Ideal Complement
The work platform leaser is satisfied, the new orders can start rolling in. However, he is still worried about one thing: pre-financing this extra business. Operating costs, which are generally rising anyway, must be covered, and a new employee has to be recruited before the first euro flows back into the company. As the conversation touches this point after the conclusion of the leasing agreement, the leasing agent suggests to approach his colleagues from the GFKL Group’s factoring segment. They are even near by, at the same stand, as leasing and factoring complement each other perfectly. Through factoring, i.e. the sale of cash receivables from services rendered, liquidity flows to the work platform leader immediately after the amount has been factored. At the same time, he safeguards himself against default risks. His equity is conserved. Thus, the company finances itself in congruence with its sales, and puts its growth on a solid basis. Leasing and factoring are therefore the two supporting pillars of a balanced liquidity policy.
