Enjoying a new lease of life

For the SME market in this country, there are often stark choices to be made when procuring IT systems and services. Even before the customer is anywhere near deciding what is required, there will be alarm bells ringing in their head, asking them how they are going to pay for it. The fact of the matter is that, in many cases, it will be through leasing.

A recent survey published by the Finance and Leasing Association shows that over 50 per cent of companies in the UK used leasing between 1992 and 1995 and that for the SME market in particular, it was an obvious choice to drive business growth and profitability.

In contrast to larger businesses - where the decision to lease is largely motivated by tax benefits - for SME's the decision to lease is often based on factors such as basic business survival. Without leasing, the researchers concluded, many projects would not have been undertaken and many small firms would not have survived.

In such a climate, the choice and flexibility of financing is as important as the choice of IT systems. For an SME, trying to improve its information and communications technology infrastructure, the sheer pace of change is daunting.

That is why many SMEs, when faced with the choice of paying outright for systems and services that could soon be out of date, or taking a lease option on high-spec equipment, are increasingly choosing the route that gives them the flexibility to upgrade without the initial financial impact.

The appeal of leasing has as much to do with the flexibility it offers as the cost savings. The leasing company will provide the finance for the IT purchase, the systems provider, dealer or reseller is paid at once and the customer gets the equipment it requires immediately.

Regular payments are fixed over the term of the lease and, unlike other methods of finance that can tie the user into a particular IT solution, the customer is free to upgrade at any time during the agreement.

This removes the burden of ownership and spreads the payments over the expected life of the equipment - a proposition many are finding attractive as the IT market continues to develop.

Indeed, when it comes to the acquisition of IT, any vehicle that enables a hassle free upgrade path, with little or no impact on cash flow, must warrant further investigation. In the IT purchase equation, why would a business want to embroil itself with ownership? Especially ownership of an asset that, from a resale standpoint, will have little realisable value shortly after it has been acquired.

Today's business managers have enough on their plates, staying up to date with the daily running of their company and keeping track of how IT can help them meet their targets.

Leasing can bring real benefits to many businesses. It helps change the attitude from one of 'how much will this cost me?' to one of 'what are the benefits to my business of using this equipment?'

In removing the anxiety and pain of financing an IT investment that is going to bring real benefits, leasing can appear a very attractive option.

Sean Williams is director of Sales at The Systems House Group