Finance Your Project

Finance your interior office refurbishment projects

In these times of uncertainty, business has to continue. If you need to grow your business or move premises, it’s hard to warrant spending your cash therefore retaining this in your business makes more sense with the use of asset finance.

That’s why here at Rap Interiors, we wanted to share with you what many of our cash-rich clients are doing to facilitate their workspace interior fit-out or refurbishment.

The Big Six

A finance lease allows all of the repayments (both the capital and the interest) to be treated as fully, 100%, tax-deductible.

This is one of the most misunderstood reasons but certainly one of the most popular.

Equivalent cash purchases typically only deliver partial tax relief through the system of capital allowances and, where they qualify, enhanced capital allowances (ECA).

Although not relevant to public sectors that don’t pay tax, such as NHS, education and government, for example, it can be a game changer for profitable, private companies, subject to corporation tax or income tax as in the case of partnerships and sole traders.

The equation has become somewhat more nuanced over recent years after the government introduced the Annual Investment Allowance (AIA) in 2008.

Subject to certain caveats, the AIA does provide businesses with the equivalent of 100% tax relief on qualifying investments up to a set threshold each year, even when using capital.

That said, as many costs in a project simply don’t qualify for an AIA and/or the business has used up its allowance for the year elsewhere, finance remains a great way to maximise tax efficiency for many companies.

When you look to invest, whatever the size of your organisation and interior design project, you will be forced to consider the available budget.

Budgets are there for a reason of course and living within your means is a powerful philosophy in business, as it is in life too.

That said, budgets can be artificially restrictive and potentially quite damaging to the aspirations of any organisation.

Traditionally there are 3 solutions when what you want to achieve doesn’t quite match with your budget:

1.Lowering your aim

Trim down your requirements to match your available capital. The result can often mean compromising on the scope, quality and, ultimately, the outcome of your project.

2. Deliver it piecemeal

Do what you can now and wait until your next budget, or when you have more budget available, to do the rest. This can also be known as phases which we did at World of Books.

3. Scrap it

Don’t go ahead at all. For some projects, this is the only way forward as they can’t be massaged to fit into a smaller pot.

Luckily we aren’t so traditional and have a fourth option:

4. Finance.

By spreading your costs over the useful life of the assets you are investing in, the demands on budgets fall away.

For many, this turns a capital expense into an operating one.

With low, fixed payments you can deliver the project you want, without compromise, and one that maximises the benefits for all your stakeholders.

A finance agreement gives you the ability to spread your costs over time as you use the assets.

Unless you are investing in vintage cars, premium wine or works of art, for example, it is a sad fact that the assets you are buying will depreciate from day one. What’s more, in the vast majority of cases, they will only return value over time too.

When you consider that using capital sees you paying upfront and in full, it’s not surprising that many people are switching on to the idea of spreading their costs in line with the return on investment over time.

Over recent years, the concept of treating your fit-out and furniture as a service has also become much more popular.

This is essentially what a finance agreement gives you – the ability to spread your costs over time as you use the assets.

Spreading the cost over time offers a number of strategic and asset lifecycle benefits above and beyond using capital.

Often in business, we sweat an asset for as long as we can. We stretch every last drop of value out of it until it either fails or becomes too costly to keep going. Then we are faced with having to spend a significant amount in a hurry, that we probably haven’t budgeted for, so our business is then not affected.

Asset finance takes this pain away, ensuring that your organisation always has the latest technology, equipment infrastructure or environment so that you have that edge in your market.

For a fixed, low amount each month, or quarter or annum to suit you, you never have to face large spikes in demand on cash flow again. Or face the prospect of using old tired equipment or office space. Once the agreement comes to an end, you simply enter into a new agreement for brand new assets and the cycle repeats itself.

Sinking capital into assets that depreciate from day one and only return value over time is very much questionable when it comes to determining the best use for your cash.

It might surprise you to know that a good portion of the 10k+ customers we work with are large, profitable and cash-rich organisations.

These businesses have strong financials and attract the best rates and commercial terms. Unlike those that need finance because they don’t have the available capital, many of which will have challenging credit profiles.

Furthermore, they recognise that they can make their cash reserves work harder for them by deploying their capital where it will make greater returns.

That could be staff, sales, marketing campaigns, online and web presence just to name a few.

Their finance teams understand the importance of return on capital employed (ROCE) and so freeing up capital to be put to work, generating greater profitability can be highly beneficial for them.

The impact of VAT, particularly for larger interior projects, can be a serious consideration with regards to cash-flow for some businesses.

Although most will be able to reclaim the VAT, depending on the timing of the refurbishment project, businesses will face, typically, up to three month’s exposure until they complete their next VAT return.

Most forms of leasing (excluding hire purchase) allow the VAT to be spread throughout the entire term of the agreement with the VAT due only on the amount of each repayment.

This helps cash flow but is particularly powerful for those who cannot reclaim VAT, softening the impact of that for any large project that they are considering.

So that’s why people use asset finance for their interior projects!

These are just six of the drivers behind organisations turning to asset finance as a way of funding a whole range of their investments including interior design projects.

Businesses are having to re-engineer their office environment as a result of this current pandemic, providing home office furniture and technology for their employees and incur huge costs they never envisaged at a time when, for many, their income and business has been massively suppressed.

Find out how to finance your project

Rap Interiors, established for over 32 years, only work with reputable suppliers.

We have chosen Bluestone Leasing, the largest independent specialist for the fit-out industry, to work with because they have the same commitment to excellent customer service as us.

We can help make your projects happen when you need them, so please don’t hesitate to contact us by calling 0333 600 1234 or fill out the form below.