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Taking Flight: Asset Finance & Drones

Published on 24th May 2017 - Last update on 19th November 2019

A technology that’s caused a mass frenzy of excitement and stirred a lot of hype within the SME business community was the emergence of drones. Fast, agile and airborne, drones have set themselves firmly inside the heart of media establishments and see regular use in covering sports, TV and film production, and aerial surveillance. In fact, drones are also expected to see increased use along British borders and coasts. However, are we just scraping the surface when it comes to this form of technology?

Drones in business

Business drones have been a concept that’s been tossed around for some time. Popular food chains and the likes of Amazon have experimented with the idea, using drones in and around various areas of their businesses. Not to mention that various architectural firms are using them as cheaper and faster alternative to scaffolding in order to survey those hard to reach areas. Although it may be some time before we regularly see drones transporting hot dogs or plasma TV’s over our heads, for health and safety reasons, there’s still plenty of areas where drones can be extremely beneficial. You just need to need to let your imagination take flight.

The benefits of drones

One of the great benefits of drones is that they’re fast. Although the longest flight time recorded for a drone was around 22 minutes for a distance of 2km, drones could, no doubt, prove a time and cost efficient solution on short distance goods and service deliveries. However, this is still a technology where business owners are still trying to fully appreciate the benefits on offer. But if you’re eager to see what drones can do for your business or are seeking to expand an existing fleet, well, you’re in luck. The business finance boffins at Rangewell can help find your business find the perfect finance solution to lift your goals off the ground, including Asset Finance.

What is Asset Finance?

An extremely popular method of financing business drones is through Asset Finance. Tailored perfectly to meet your exact requirements, it’s everything you need for acquiring all the drones your business needs. One of the great benefits of this finance product is that it allows you to spread out the costs for up to 7 years, making drone procurement much more affordable.

Plus, depending on the product, you may even be able to reclaim capital gains tax and VAT. Just be certain to discuss the potential tax benefits with your business accountant before entering any finance arrangements.

How does Asset Finance work?

Fully customisable and adapted to meet your business’ specific needs and circumstances, Asset Finance offers a full range of functions. By applying for Asset Finance you can either purchase, lease or release equity locked away in your existing unencumbered assets. To offer this, Asset Finance is a unique finance package consisting of Leasing agreements, Hire Purchase solutions, Asset Refinance and so much more.

Leasing Agreements

Leasing Agreements are an excellent way of escaping the burdens of drone ownership. As such, depending on the product, the drone may or may not appear on your business’ balance sheet. Leasing terms also tend to last up to 5 years but could be extended to 7 years depending on the circumstance. It’s also worth noting that you may incur VAT on the rental payments, but could reclaim it on a quarterly basis. However, before progressing any further, you need to understand and appreciate the differences between Operating and Finance Leases

  • Operating: leases allow your business to acquire the use of a drone for a portion of it working life, meaning that the asset might not appear on your balance sheet. Plus, unless you set up a separate agreement with the supplier, you will be tasked with maintaining the drone. You will also be entrusted with making fixed monthly rental payments which take into account the term’s length and the drone’s predicted worth at the end of the agreement. Subject to conditions, when you arrive at the end of the term, you’re free to either return or continue using the asset in exchange for a nominal cost at the lessor’s discretion.
  • Finance: leases work differently, instead, covering the majority of the drone’s working life. As such, the drone may appear on your business’s balance sheet. Yet, likewise, with operating leases, you will again be entrusted with the drone’s maintenance and upkeep. In addition, you will, again, be required to pay fixed monthly rental costs for the use of the asset. Rental costs take into account: the length of the term and the predicted worth of the drone at the end of the agreement. When the term expires and the rent settled, you’re free to either return the asset or upgrade to a higher model – subject to conditions.

Hire Purchase

Hire Purchase solutions offer you a way of acquiring the use of a drone and eventually becoming its owner. How this finance solution works is by the lender purchasing the drone from the supplier on your behalf, allowing your business to acquire its use whilst making fixed monthly repayments, plus interest. However, before you can use the drone, you must first pay an initial deposit. An initial deposit covers the full VAT and around 10% of the asset’s cost, although this is negotiable depending on the circumstance. The repayments are calculated over the agreed term and take into account both the capital and interest. Providing all the repayments have been concluded, ownership of the asset is handed over to you.

Asset Refinance

Asset Refinance allows you to unlock the value tied up in any of your existing and unencumbered assets, enabling you to receive a lump sum off the back of them. As such, Asset Refinance is a great way of raising cash for your business without having to go to your bank. Technically a type of secured loan agreement, as the funder takes security in the assets, terms can typically range up to 5 years during which you will be required to make fixed monthly repayments. As such, should your business fall behind in making the fixed monthly repayments, the finance lender can seize the assets in order to recover the remaining costs. At the end of the term and once the finance has been fully repaid, ownership of the asset is returned to you.

Why Rangewell?

Our values are simple – We’re on your side. Our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.

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