IT equipment finance for laptops, servers, networks and phones

A five-year-old excavator still has a buyer. A five-year-old laptop has very little value, and a server configured for one business is worth little to anyone else once it is removed. This is what lenders mean by a soft asset, and our guide to soft asset finance explains the idea in more detail.

The practical effect is that the lender is really lending against your business. Expect them to look closely at your trading record, profitability and cash flow, to keep terms short (often two to five years, in line with the useful life of the kit), and to ask directors of smaller companies for a personal guarantee. A strong, established business can usually fund IT with no deposit; a younger or weaker one may be asked for an upfront payment or a shorter term.

The strongest case for leasing IT is the refresh cycle. Devices slow down, fall out of manufacturer support and stop receiving security updates. Buying outright tends to mean running kit for too long because the replacement has not been budgeted. A lease set to the cycle you actually want, often three years for laptops and longer for network infrastructure, turns that into a known monthly cost.

Some lease structures allow you to add equipment part way through as the team grows, with the additions co-terminating with the original agreement so everything refreshes together. Others allow an upgrade before the end of the term by settling the existing agreement into a new one. Both are useful, but the cost of an early upgrade depends on what remains on the old agreement, so ask how it is calculated before you sign.

A new office network or a company-wide laptop rollout is rarely just hardware. Installation, configuration, imaging devices, migrating data and training staff can be a large part of the bill. Lenders vary in how much of this they will include:

• Perpetual software licences bought with hardware are often accepted as part of the package.
• Annual subscriptions, such as cloud software billed monthly, are usually better paid as a running cost than financed.
• Installation and project work is commonly included where it is a modest share of the total and invoiced by the same supplier.

Ask your supplier to itemise the quote into hardware, licences and services so lenders can see the split. Software businesses funding development rather than equipment should look at software company funding.

Every laptop, server and phone holds business and personal data. At the end of a lease, or when owned kit is retired, that data must be removed securely before the equipment leaves your control, and the National Cyber Security Centre publishes guidance on secure sanitisation and disposal of storage media. Electrical equipment that reaches the end of its life also needs to be disposed of properly under the WEEE regulations.

Before you sign, check who is responsible for collection, certified data erasure and disposal at the end of the agreement, whether there is a charge, and what happens if a device is lost or damaged. Many IT lessors and resellers provide certified wiping and recycling as part of the return process.

Limited companies, LLPs, partnerships and sole traders can apply. Because the equipment offers little security, lenders weigh:

• Trading history: two or more years of filed accounts gives the widest choice; younger businesses can be funded but options narrow.
• Profitability and cash flow: bank statements and management figures showing the payments are comfortably affordable.
• Credit record: business and director credit history, including any missed payments or county court judgments.
• Existing commitments: other leases, loans and finance already in place.
• The supplier: an established reseller or manufacturer with a clear quote.

Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections.

The equipment is the formal security under a lease or hire purchase agreement, but lenders know it has little resale value, so personal guarantees from directors are common for smaller companies. Larger, well-established businesses with strong accounts may be able to avoid a guarantee. Property security is not normally needed.

A straightforward laptop or phone system lease for an established business with a clear supplier quote can often be decided quickly once the lender has the accounts and bank statements. Larger projects with a mix of hardware, software and services, or businesses with limited trading history, take longer while the lender reviews the detail. Timescales depend on the lender and are not guaranteed.

Illustration. A 40-person consultancy needs new laptops for every member of staff, a replacement firewall and wireless network, and meeting room video conferencing, a package of around £90,000 including configuration and data migration. The laptops go on a three-year operating lease so they refresh together, with new starters added to the same agreement. The network and conferencing equipment, expected to last longer, go on a five-year finance lease. The figures are hypothetical and each lender sets its own terms. A law firm making a similar investment might also read our page on law firm technology finance as an example of how one profession approaches it.

• Cash purchase: cheapest overall, but uses working capital and tends to stretch refresh cycles.
• Device-as-a-service: some suppliers bundle hardware, support and replacement into one per-user monthly fee. Compare the total cost and the exit terms.
• A business loan: suits projects where most of the cost is services or software rather than hardware.
• Cloud services: moving servers to the cloud swaps a capital purchase for a running cost, which may remove the need to finance hardware at all.