OPEX FINANCE

Buy now yet spread the cost of your new solution over it’s useful life

Nearly all of the solutions that VectisNET provide have a large software element.  Our vendors love to incentivise multi-year contracts through aggressive discounting, however, the challenge this brings for organisations is finding the budget or cash-flow to take advantage of these pricing incentives.

VectisNET have partnered with a finance provider to enable our customers to spread the cost of technology over the time they will be enjoying the benefit of the solution.  This option delivers some clear business benefits:

  • No need to pay upfront for a depreciating asset
  • Spread the cost of the solution over it’s useful life as you receive benefit from it
  • Keep valuable cash reserves in the business, rather than investing upfront in software you can never actually own
  • Offset the ongoing repayments to receive tax relief on the investment
  • It adds additional credit lines for the business that are completely separate to your traditional banking relationship

When we highlight a finance option to organisations it tends to attract a negative reaction, as mainly all that is heard is the message “added interest”.  In reality, because OpEx Finance means the asset can be accounted for in the same way as expenses such as business premises rent, when the tax relief you can claim against the ongoing payments is factored into calculations the finance option works out around the same total cost when compared with buying outright – the key difference is that you don’t need to commit capital reserves upfront when you take out an OpEx Finance facility.

Here is an example for illustrative purposes (ex VAT):

  • Software solution 3-year package total cost = £50,000
  • 3 year finance package = 36 months @ £1,760 per month*
  • Total additional interest = £13,360 
  • Offsettable tax relief = £13,306**
  • Net total solution cost = £50,054

*Indicative finance rate  **Based on 21% corporation tax

OpEx Finance can also be referred to as ‘leasing’ or ‘lease-rental’.  The asset we’ll be financing in most instances will be software, usually including subscription licensing that expires at a set date – this means that towards the end of the finance term we can look to provide predictable and comparable finance options for subsequent purchases or renewals once your initial facility expires.

Each finance facility is highly flexible; should an organisation wish to take on additional licenses or new solutions during the term of the finance facility, you’ll have the option to either co-terminate a brand new facility to end alongside your original facility, or we can provide a completely new tailored finance facility.  A further option would be to upgrade the original facility: in this instance we would consolidate how much is left to pay on the original agreement with the new spend added to it and spread this new total out across a new finance term – the benefit could be that ongoing monthly payments may therefore actually reduce, however, the negative would be that this type of facility is essentially charging interest on top of the outstanding interest & capital amount of the original facility (known as ‘compound interest’).

From a contractual position, the legal “title” of the asset remains with the finance company during the term of the agreement, however, in the instance of software subscriptions there is nothing tangible that can be repossessed, so legal title passes to you automatically & free-of-charge upon the final payment (which usually corresponds with the month the software license expires).

All finance rates offered are subject to underwriting by our preferred lender.  Please be aware that, should our preferred lender reject your credit application, we may still be able to provide a facility with an alternative funder but the repayments may increase slightly - in these instances VectisNET will keep you informed of our progress and report any proposed changes, you then have final approval on whether to proceed on any revised facility costs.   

Any customer looking at our OpEx Finance options can be reassured that you retain all of the buyer’s rights you would have as if you had decided to make a capital purchase.