Professional services equipment finance

How do accountancy and legal firms finance office equipment?

Accountancy, legal and consultancy firms typically lease IT hardware and software-dependent systems, since these are refreshed every few years, and use hire purchase for durable fixtures and fittings kept for the life of the office lease. Spend in this category is usually concentrated around a house move, a lease renewal or a headcount jump rather than spread evenly, so financing smooths that lump against otherwise steady monthly overheads instead of drawing on cash reserves in one go.

Buyers are accountancy, legal and consultancy firms, agencies, and other office-based businesses, most often fitting out or expanding premises around a specific trigger, such as a house move, a lease renewal, or a headcount jump that outgrows the current office setup. This kind of spend is lumpy by nature, arriving all at once around the trigger event rather than spread evenly across the year, which is exactly the pattern equipment finance is designed to smooth against steady overheads.

Leasing suits IT hardware and other software-dependent systems well, since these are refreshed every few years as operating systems, security requirements and client expectations move on, and a firm generally wants a predictable technology refresh cycle rather than equipment it runs until it fails. Hire purchase suits durable fixtures and fittings, such as furniture and general office infrastructure, which a firm expects to keep for the life of its lease rather than replace on a technology-driven cycle.

Office IT has thin resale value once superseded, since firms generally want current, secure hardware rather than a previous generation however well maintained, and general fixtures and fittings have essentially no resale value once removed from the office they were fitted to. Because of this, lenders in this category lean heavily on the firm's trading record rather than the equipment itself as security. A firm with a long, stable client list is generally viewed favourably here even though the equipment itself offers little security.

The mistake we see most often is financing office IT over a longer term than a typical hardware refresh cycle, which leaves a firm still paying for equipment it has already replaced for security or performance reasons, effectively paying twice for the same capability during the overlap. Matching the finance term to the actual IT refresh policy of the firm, rather than the longest term a lender offers, avoids that overlap in most cases.

People also ask