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Wesleyan Bank offers top tips on how leasing can ease the school funding challenge

Wesleyan Bank offers top tips on how leasing can ease the school funding challenge

From interactive whiteboards to educational apps, modern technology and equipment can have a major influence on how pupils learn by enhancing student engagement and behaviour.

Although many schools and colleges are attempting to break away from traditional classroom and curriculum models, their ability to keep up with the pace of innovation is being compromised as budgets become increasingly stretched.

In a recent joint survey conducted by The Association of Teachers and Lecturers and the National Union of Teachers, 73% of respondents said their school had cut spending on books and equipment, while 46% reported cuts to ICT.

Meeting the expectations of students, staff, parents and governors is almost impossible when funds are simply not available. However, alternative finance solutions can offer a flexible and affordable way for educational institutes to invest in the facilities they need to prevent them getting left behind.

Leasing is one way to enable pupils to benefit from a first-class learning experience but the process can be complex to navigate due to the myriad of options available. The Finance and Leasing Association (FLA) has recently published its 'Leasing guidance for schools' whitepaper.

From this, Wesleyan Bank offers the following top ten tips to enable schools to make the right financial choices for them when considering leasing equipment.

  • 1. Assess whether you need it - a robust commissioning process is key to running an efficient procurement operation. Always conduct a pre-purchasing review to establish what equipment is needed and determine the specification and evaluation criteria before considering any type of finance. This will help you to gain best value and prevent vital resources from being wasted.
  • 2. Check the proposed agreement is legal - the only type of lease agreement that can be taken on (without prior specific approval) by a state-funded school is an operating lease, as the use of finance leases require the Secretary of State's approval. If you are in any doubt about the legality of the proposed agreement, seek professional advice before committing to the arrangement.  Operating lease agreements typically have a shorter duration than the working life of the equipment and the leasing company retains the risks associated with ownership. 
  • 3. Compare the market - compare the cost of leasing against the cost of purchase. Leasing allows schools to avoid expensive up-front costs and acquire the equipment you need, when you need it, by making payments over time during the period it will be used. But schools should also be aware of the cumulative costs involved when leasing to see which option is best suited to their cash flow.
  • 4. Choose your finance company carefully - some suppliers may offer both the equipment and finance, however the latter may be via third party companies. Shop around and speak to different providers - are they trustworthy and reliable? Leading firms offer tailored funding solutions for schools to cover specialist equipment, new classrooms and school buildings as well as IT solutions which include software, hardware and associated training, installation and support in one flexible package.
  • 5. Beware of additional costs - make sure you understand all the potential costs and whether they may change during the course of the agreement. For example, when leasing a photocopier there may be a charge per copy (depending on whether it is mono, colour or two-sided) and additional costs for ancillaries, such as staples and ink.
  • 6. Check the minimum lease period - this fixed agreement covers the shortest period for which you will have to make rental payments for equipment, regardless of other factors such as changes to technology or the school's needs. Consider how long you have tended to keep similar equipment in the past to establish whether the minimum lease period is likely to be appropriate for the school's needs.
  • 7. Know what happens at the end of the lease - understand what options are available at the end of the lease period before signing the agreement so you can make an informed decision to continue to lease the equipment or return it. If returning, check how far in advance you need to give notice and if you do wish to continue leasing make sure the market rates are competitive. Should you wish to switch suppliers, remember that the agreement is between the school and the original finance company. If the new company fails to pass on the outstanding lease debt, the school could still be liable.
  • 8. Review the maintenance and supplies details - be clear on whether maintenance or supply services are included or if they form a separate agreement to the lease as this could unexpectedly eat into your budget. You should also have in place contingency plans if the company providing the maintenance or supplies goes out of business and assess how this would impact your use of the equipment and lease payments.
  • 9. Think before upgrading - if your school's needs do change, seek advice from your finance company first before proceeding to upgrade. The remaining balance on your existing agreement can be cleared by paying off any outstanding rental payments up front, or these payments can be included in a new lease along with the cost of the new equipment. The latter option will burn a significant hole in the school's finances though as you will be paying capital and interest charges on both the new equipment and the balance of the previous agreement carried forward.
  • 10.  Be wary of incentives - if it sounds too good to be true, it probably is. Attractive incentives such as cash-back, 'free' equipment or the school being used for marketing purposes may offer short-term advantages but could become a long-term burden. Fully understand how they will impact the terms of your lease agreement and regular payments to avoid entering into a financial commitment your school is unprepared for.

Wesleyan Bank is proud to work in partnership with academies, primary/secondary schools, colleges and universities to help realise their technological and educational potential.

From ICT and learning platforms, to recreation and sports equipment, we work with you to intelligently deliver best value investments. As a BESA member you can rely on our knowledge and expertise.

Download the FLA's  'Leasing Guidance for Schools' document.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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