Why office furniture leasing is not necessarily a great option

It seems like a perfect idea. The business needs new desks, chairs and cupboards and that refurbishment is long overdue. Or perhaps it’s time to move and the old furniture won’t make it in one piece. The furniture supplier wants to make the sale. Business has been slow and it’s the end of the month and sales targets need to be met. The company is making profits and the order book is pretty full, but cash is tight and the Finance Director begrudges every penny spent. So why not arrange for the furniture to be leased? It’s a question people in the office furniture supply business have now been asking for a number of years.

Contract hire on cars or vans is easy to set up and the car salesman sees it as a painless way for his customers to fund their purchases, and his commission. New machines for the factory? Again, very easy to finance on a lease. There are plenty of finance companies who’ll fund that.

But office furniture? Almost impossible. Why? Because no self respecting finance company will touch it. Firstly, the amounts required are generally too low to interest a finance company. They like single pieces of equipment with a cost of at least £10,000.Ideally much more. Secondly, there is very little value in second hand office furniture to protect the finance company if they have to repossess after a transaction goes wrong. And finally, office furniture is made up of a large number of relatively low value items that are difficult to identify, have no individual serial numbers and don’t stay still. They are always being moved around, damaged and getting lost.

So it’s not surprising that any company setting up to finance the acquisition of office furniture on lease gets swamped with offers of doubtful value business and rarely stays in the business for very long. Hamilton Leasing, a 3i company, tried it many years ago but despite being backed by millions of pounds of funds, it failed to make a go of it. Who wants to try next in the uncertain world of office furniture leasing?

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John Sacks is a chartered accountant, with an honours degree in Law from the University of London, and over 40 years experience managing office furniture manufacturing companies in Europe. Now Managing Partner in JSA Consultancy Services, a business consultancy based in London which helps international office and contract furniture companies with their corporate strategy, marketing and product design and development.

www.jsacs.com