Equipment finance for freelancers
By Duncan Payne Finance specialist at Fineline Media Finance
Freelance Cameraman, Recordist, Editor? Buying your own Kit?
As providers of continually evolving facilities to the broadcast and extended media industries, all freelance cameramen will at some point face the conundrum of buying their own camera kit.
The last twelve years have seen many changes, especially in formats, and whatever route you go down my advice remains the same as it has always been: get close to your clients, get close to a rental company, get close to an authorised dealer, and get close to a specialist finance company. The closer you become to your clients, the better understanding you will have of their production requirements. It is feasible that you might even be able to influence the particular format they elect to shoot on, but ultimately you will build up an understanding of what acquisition format you are required to supply most often.
By developing a good relationship with one or two rental companies – preferably those who stock all the formats you use – you should hopefully enjoy beneficial trading terms as well as invaluable back-up support.
A good dealer will ensure you are kept advised of ongoing product development. The closer you are to your chosen dealer, the less likely you are to be sold an end of line model.
Regular dialogue with a specialist finance company will keep you appraised of finance costs, not necessarily in terms of what the APR is this week, but more crucially how much money per month will it cost to finance a particular camera. At the point in time when your ongoing monthly hire costs for a particular camera exceed the monthly cost of financing a purchase of the same camera (and assuming you have a degree of visibility to your customers’ ongoing demand for the same format) then it could be the time to consider taking the big step to invest in your own equipment.
The equipment should pay for itself
Just as the primary reason for buying a car is to get you from A to B, and not as a long term investment, the primary reason for buying a camera kit should be because it is more economical than hiring. Therefore the best commercial advice I can offer is that you should pay for your camera, over its useful life, from the revenue you generate by using it.
As a guide, a camera kit costing £20,000 + VAT will cost around £900 per month over 2 years, or around £630 over 3 years. Don’t forget that it will be a condition of the agreement that you insure the equipment at your cost for the duration of the agreement, so factor this cost in to your decision. It’s also worth noting that you can finance equipment that isn’t brand new. Sometimes it’s easier to fund second hand equipment, particularly if you’ve spotted a bargain.
Most finance agreements are 2 or 3 year deals, although we will look at longer terms on request, particularly for specific pieces of equipment such as lenses where the useful life of the equipment is expected to be longer.
Make use of promotional finance deals
Some of the major manufacturers do run finance promotions periodically, often offering 0% finance deals through their authorised dealer channel. Panasonic, Sony and JVC have all run this type of offer, as well as other broadcast manufacturers such as Vinten, Sachtler, Sennheiser and Shure. Take advantage of these deals. There is no catch, it’s just free money.
Lease or Hire Purchase
The vast majority of finance agreements that Fineline arrange are on Hire Purchase ( H.P. ) terms, where all the VAT is paid at the outset ( and reclaimed in your next VAT return if you are VAT registered ) and ownership at the end of the term is very clearly with the customer.
Finance leases do not hit your cashflow as hard at the outset as you pay VAT on the monthly repayments, not in a lump. But ownership is less clear at the end of the term, and it is usually cheaper overall to sign up to an HP agreement if you can afford to fund the VAT at the start.
Check with your accountant how they account for finance agreements before you sign up. And while we are talking about accountants, make sure you’ve got a good one. They can be worth their weight in gold.
Paying outright in cash
If there is no manufacturer finance programme, then the cheapest option when purchasing equipment is to pay outright in cash. A word of caution though, ready cash is still in short supply right now and you would be advised to hold on to whatever reserves you have. Let the camera pay for itself.
Using your mortgage
Some cameramen have been tempted in the recent past to add the cost of their camera to their mortgage as it carried the most attractive interest rate – don’t do it! In three or four years you will probably be considering changing you camera for another, but the major element of the cost of your previous camera will still be outstanding on the remaining 10-20 years of your mortgage debt.
Using your overdraft facility
Your bank is probably the first option for many of you. You may have headroom on your business overdraft or you may be offered a loan facility. Now I clearly have a vested interest in what I am about to say and will obviously not appear impartial, but use your bank for your banking requirements. Maintain access to your available overdraft facility – which is possibly secured by personal guarantees or a charge over your home – for covering your business running costs. Don’t use up your working capital facilities to pay for capital expenditure – or in English, don’t use your cash, let the camera pay for itself.
Using a specialist finance company
By speaking regularly to a specialist finance company, you’ll have an idea about the cost of borrowing, and the chances are they will already have built up a useful picture of you and your business which will help them to make a much quicker decision. Any finance facility they offer will be stand-alone, outside your existing banking arrangements, and therefore will not affect your ability to renegotiate your overdraft if for any reason that becomes necessary – leave your options open. The specialist will also understand the nature of your business and what your new equipment investment will mean in terms of both revenue and, more importantly, margin.
They will also have a realistic view on the level of financial security provided by the camera, lens and accessories and are less likely to seek the type of additional support favoured by your bank. And a finance agreement specific to your camera kit will be fixed for the agreed period of time at the agreed rate – giving you the comfort of guaranteed budgeting and no “on demand” pitfalls, providing you keep up your repayments of course!
The economic turmoil of the past 3 years has been far-reaching, but what does that mean for you, the freelance cameraman striving to keep abreast of the continuing technological evolution in your industry? Well, if your business model is sound and your professional relationships are strong, then it should mean business as usual.
Be aware, though, that money is still in short supply – despite the efforts of successive Governments – as the banks strive to meet more stringent capital adequacy requirements. Also, due to recent bad-debts and losses, mainly in the post-production market, many finance providers, while still operating in the wider market generally, have pulled out of the media and broadcast markets completely thus reducing your options further – so seek advice. Ask your rental companies who they use for finance, see if your dealer recommends anyone. Talk to a specialist!
Whilst what I have said here may be directed specifically towards freelance cameramen, the fundamental principles outlined remain true for larger businesses and companies involved anywhere in the glass-to-glass production process of the broadcast industry