Leasing Made Easy equip yourself for the future 1 Welcome to the equip scheme If you are a business operating in the recycling or preparation for re-use sector, you will already know how hard it can be to lease vital machinery and equipment. Understandably, banks and other lenders are often reluctant to look at technologies they are not familiar with, especially in a new and unproven sector such as recycling and preparation for re-use. Often, this reluctance can be traced back to the simple fact that the residual value of such equipment (what it will be worth at the end of a lease) is very hard to calculate. This is where equip can help. Set up by WRAP, the equip Residual Value Guarantee (RVG) gives companies positive help to lease the machinery they need by guaranteeing its future residual value. Our aim is to promote the development of recycling and preparation for re-use enterprises in the UK by providing access to lease finance for plant and machinery. How the equip scheme works Essentially, the idea is very simple. We ve set up a panel of banks and leasing companies who will consider lending to these sectors. When we introduce applicants to them, we also agree with them a residual value of the asset in question so that they can calculate competitive repayments, safe in the knowledge that, if the worst happens and the machinery depreciates more than expected, we ll make good any shortfall. To understand this opportunity and the scope of the scheme more fully, further information is provided on the following pages. Then, if you d like to go further, simply fill out the enclosed application form. Who knows, with equip, things might be looking up for recyclers and re-users everywhere.
The benefits of leasing Leasing is an additional line of credit for your business; effectively, it s a rental agreement that allows you to spread payments over a fixed term related to the life of the equipment. VAT is charged on each individual rental payment, removing the need for it to be paid up front. Terms can be flexible and possibly tailored to meet the expected cash flow of your business. The lessor may require advance payments (usually three or six months) at the start of the lease depending on the risk associated with each proposal. Under equip, WRAP will guarantee the future value of the equipment you want to lease, which has the effect of reducing your regular rentals. The value of the equip guarantee will relate to the specific equipment leased and the expected market conditions for disposing of the equipment at the end of the agreed lease period. Unlike overdraft facilities, lease facilities are not generally repayable on demand or subject to annual reviews. You can be sure that as long as you can make payments and honour the terms and conditions of the contract, the lease facility is secure. All rental payments made by your company can be set against your tax liabilities. Capital allowances are claimed by the owner (lessor) and the taxation benefit of this is reflected in your rental payments. If your business is not yet paying tax or is paying at less than the standard rate of Corporation Tax, then you are accessing benefits based on the owner s ability to claim the tax relief. It is always best to discuss the details of any Lease Arrangement with your accountants or financial advisers to ensure that the facility meets your business needs. equip approved lease providers: 2
Check whether your business is eligible today It is important to read the information below before completing an application to ensure that your business is eligible for support. The equip scheme is open to: businesses demonstrating strong market demand for their product or service; Small and Medium sized Enterprises (SMEs) and larger companies throughout the UK*; businesses where the prime activity must be one of the following: a business which is sorting, reprocessing. preparing for re-use or recycling plastic, textiles, glass, wood (treated/contaminated) and organics where food waste must form part of the feed stock (through In-Vessel composting or Anaerobic Digestion only. Please note that if your project will generate electricity and receive FITS it is not eligible for support via equip); a business offering a collection technology or infrastructure that is specifically designed to enhance the above; or a business which manufactures products incorporating the above materials. equip can support energy to waste applications but it must be clearly demonstrated that there is no other higher value use for the material. 50% of the feedstock must come from third parties and a financial deduction will need to be made from eligible costs if you are processing your own waste (e.g. farm waste). Please contact the Scheme Administrators for further details. IMPORTANT: Applicants must satisfy themselves of the implications of accepting State Aid on any other Government funding source they may be planning to draw on. Applicants must have explored all available sources of finance before applying to equip. The equipment must be used for the purposes outlined in the eligibility criteria and equip will not support: vehicle leasing; non-specific recycling equipment e.g. fork lift trucks; the sale and leaseback of equipment already owned or used by an applicant (NB: second hand equipment can be guaranteed through the scheme); and the sub-letting to a third party of any equipment acquired through the equip scheme. *If you are not an SME, then the financial benefit you will gain from the acquisition of the new equipment will have to be declared and taken into account for State Aid purposes. Please contact the Scheme Administrator for clarification. equip is not available to companies who: intend to pre-treat waste prior to landfill outputs must have a clearly defined, higher value, end market. The above is provided for guidance. If you have any doubts over eligibility or need clarification please contact Cranmer Lawrence & Company Ltd, the Scheme Administrators, to discuss. 3
Simple and easy to apply Once you ve checked you re eligible, you will then need to complete an application form and send it to the scheme administrators, Cranmer Lawrence & Company (CLC). They will place a residual value on the assets and along with us assess your application for eligibility. equip RVG will then approve or reject your application. How long does the process take? Recognising that fast financial decision making is crucial for many small and medium sized businesses, equip has been designed to process applications as quickly as possible. Applications for equipment up to 250,000 will be processed within one month, with applications over 250,000 taking a maximum of eight weeks from receipt of the completed application form. If your application is successful, it will be forwarded to our panel of banks and leasing companies, known as lessors. It is then up to you to negotiate directly with your lessor. Once you have come to a suitable arrangement, a Lease Agreement will be drawn up, which comprises of terms and conditions and the contract. Cranmer Lawrence Tel: 01494 689 500 Fax: 01494 689 515 equip@cranmerlawrence.com www.wrap.org.uk/equip equip RVG Ltd, a subsidiary of WRAP Ltd, reserves the right not to accept any application or provide a guarantee to any applicant for any reason. For the avoidance of doubt, the completion of an application form for this scheme shall not form part of any binding legal agreement between the applicant and equip RVG Ltd and the applicant shall have no rights or entitlements against either WRAP Ltd or equip RVG Ltd or its agent in respect of any application. The obligations and liabilities of WRAP Ltd and/or equip RVG Ltd and its agent (if any) shall arise only upon them entering into a RVG which they may decline or agree to do at their absolute discretion. 4
Q & As Will my company own the equipment? No, under a lease contract the equipment is owned by the lessor. Who will determine how long the lease period is? The lease period will be agreed following discussions between you and the lessor. For the purpose of this scheme leases will be no less than three years. Do I have to make monthly rental payments? This is open to discussion with the individual lessor but it is normal for lessors to require monthly rental payments. What happens if I want to return the equipment early? Return of the equipment will not remove your obligation to make all rental payments for the contractual period of the lease. The lessee has no right to terminate the lease earlier than has been agreed. In exceptional circumstances, the lessor may allow early termination of the lease; however, you would be required to pay a termination sum, which will be determined by the provisions of the lease. N.B. It s worth pointing out that early termination of lease agreements can be expensive. If it is allowed in the early part of a lease agreement, it is not unknown or unexpected for the termination cost to exceed the original value of the equipment. Before entering into a Lease Agreement, you must discuss the matter fully with your accountants or financial advisers and be satisfied that you intend to meet the contractual requirements of the lease contract What happens at the end of the lease? Providing you have complied in full with the terms and conditions of the lease, you will have two options. (i) Return the equipment; or (ii) Extend the lease arrangement. In exceptional circumstances, it might be possible for you to acquire the equipment at Fair Market Value, which will be determined by WRAP s agent, Cranmer Lawrence & Company, and will not, generally, be negotiable. If I return the equipment at the end of the lease what liabilities will I have? Generally speaking none; provided the equipment is returned in full compliance with the terms and conditions of the lease. In very exceptional circumstances, changes in Corporation Tax and related allowances can take effect after the end of a lease arrangement; there might be a need for an additional payment in such circumstances. Towards the end of the lease, WRAP s agent, Cranmer Lawrence & Company, will arrange to inspect the equipment. If they judge that the equipment needs repairing to meet the Return Conditions, you will be advised of this and given time in which to do so. The equipment will be inspected again at the end of the notice period. Should you return the equipment in a defective condition, the lessor will look to you to pay for any necessary repairs. What s the position on State Aid assistance? A lease with an equip Residual Value Guarantee is considered to have a State Aid value equivalent to a proportion of the guarantee. The State Aid equivalent value will be calculated for you before the lease is finalised and may become repayable in the event that the terms of the State Aid provision are broken. Is this arrangement an operating lease? The rules surrounding the definition of an operating lease are complex. The characteristics of the equip scheme are based on providing a rental solution. In some cases, it may be classified as an operating lease. It is imperative that you seek out the advice of your accountants and financial advisers on this matter. They will need to see the leasing documentation in order to determine the status of the lease. Will the equip scheme ensure I get the best deal? You will have to negotiate the best deal for your business as neither WRAP nor WRAP s agent, Cranmer Lawrence & Company, are able to advise on specific terms between you and the lessors. Can equip be used to support hire purchase transactions? At present the Residual Value Guarantee scheme is limited to those looking to lease equipment. 5
Guidance notes for completion Although we ask for a certain amount of detail on your application, it is purely to help us assess your application and it is treated confidentially. Please read the guidance below to ensure the form is filled in correctly. Section A It would be helpful to us if you could let us know how you heard about the equip scheme. Section B1 1. Proposed location of equipment If this is the same as that given in the contact details please enter Same as contact details. 2. Materials Tick each material type you will be treating and if some fall into Other please specify, e.g. non-ferrous metal etc. PAS 100/PAS 110 Accreditation This applies to any application for equipment relating to organic waste. We are unable to support a business which is not accredited or working towards Accreditation. Please state where you are in the process (i.e. just applying, accreditation in process). Please note that if your project will generate electricity and receive FITS, it is not eligible for support by equip 3. What is the proposed use of the equipment? Tick relevant box 4. What tonnage of material will be treated with the new asset? Note the tonnage of each material that you will treat and provide a detailed description of the material, e.g: Glass bottle glass, flat glass, lamp glass, colour separate cullet etc. Organics municipal green waste, food waste, animal waste etc. but food waste must form part of the feedstock. Plastic bottle, film, packaging, agricultural, HDPE, PET etc. 5. How much of this is new tonnage for your business? You may currently treat some of the stated material but will be able to increase the volume with the new equipment. We want to be able to estimate what additional tonnage equip is supporting. 6. What is the source of each of the materials? We would like to understand where the waste arises so please give as much detail as possible, e.g: Civic Amenity Sites or Municipal Waste name which authorities. C&D Waste which companies. Farm collection scheme please name. Skip Hire - name business/area that business collects from. Other waste contractor - please name. 7. What is the intended market for each material stream? A key outcome for the equip scheme is the diversion of material from landfill into higher value end products. It is therefore important that we understand the end markets for your products. For all materials we would like to be assured that you have end market arrangements in place so, require the names of the purchasers of the material (and if possible what use they will put the material to). If you have contracts in place please advise. In the case of large value applications we will ask for letters of intent to be supplied. If you are producing your end products to a Quality Protocol or PAS Specification, can you please enter a note to this effect. If there is any residual material at the end of the process can you state what sort of material is left, the tonnage and what will happen to it. 8. What is the estimated annual increase in turnover due to this proposed investment? Please give your best estimate. 9. Does the application process require planning permission? equip needs to ensure that applicants have all necessary Planning permissions to cover their business operation. If you are awaiting Planning decisions before you can obtain the necessary licences can you please give a brief explanation of where you are in the planning process. 10. Does the application require any specific permit/licence/exemption under Environmental Permiting or Waste Management Regulations. equip needs to ensure that applicants have all necessary waste and environmental management permissions to cover their business operation. Please enclose a copy of your relevant permit/licence/exemption. If you are in the process of applying for the above, please state what stage you have reached in the process and note any conditions that will apply. Section B2 - About the equipment If you are applying for a large number of assets e.g. for a MRF, either photocopy this page as many times as necessary and attach the completed sheets to your application or supply a separate spreadsheet listing the items; ensuring that the information is supplied in the requested format. Please provide an explanation of how the equipment you wish to aquire will fit into your operation and the process that is undertaken eg. if you are operating a MRF, where will this equipment slot into the process and is it replacing existing equipment? What have you been able to do to satisfy yourself that the equipment will perform as you require e.g. trialled the equipment, demonstration, performance guarantee? Section C - Organisation and financial information Please provide more detailed information about your organisation named in Section A. 1. Company size and ownership This information is for our internal reporting purposes. 2. Have you ever applied for grant assistance or state aid before? An individual project can receive more than one amount of State Aid but it must be for separate elements, not for the same assets. 3. Give details of the bank account you want to use if your application is successful. The lessor will require this information. 4. Is there any other information you would like to add in support of your application? This is not a mandatory question. 5. Which companies on the panel of lease providers would you like your details to be forwarded to? You may choose one or more lease providers or allow all lease providers to review your lease requirements. 6. Please attach your company accounts for the last three financial years and any management accounts for the current financial period. If you have prepared a business plan reflecting the impact of the new asset please provide this as well. If an RVG is offered the negotiations between yourself and a lessor regarding terms for a lease is a purely commercial transaction. The lessor will want to satisfy themselves to the standing of your business and the ability to meet the lease repayments. 7. If the company has traded for less than three years or is a startup, please attach your business plan, any signed off accounts and management accounts where applicable. An offer from a lessor is a commercial transaction and they will want to know that your plans have a sound basis. Section D - Disclosure of information Please read before signing the application. NB: None of the information requested is passed to other organisations. All tonnage information is reported in an aggregated form and not identified to any company. It is used solely to help WRAP assess the effectiveness of the equip scheme. 6