Monday, July 21, 2008
Thursday, July 10, 2008
What Does A Rental Do For You
The Major Rental Benefits Briefly Explained
Rental is fast becoming the finance option of choice for essential business equipment. According to a recent survey, over 80% of all US businesses rent at least some of their equipment; and these businesses range from Fortune 500 companies right down to the corner store. With this been said, it is pretty obvious that the benefits of renting are far reaching.
One of the most important components of placing your essential equipment on rental is that the rental company is in a position to carry some or all of the risks associated with managing the lifecycle of the asset. This leaves you free to concentrate on the real core functions of your business.
When considering equipment rental, the choice of rental partner is critical. Whilst some rental companies act purely as a funnel for sourcing finance, “True Rental” companies offer services that range from procurement, finance, maintenance, insurance, asset management and end of asset disposal. This means that as an SME you can reap the rewards and enjoy the benefits of rental solutions that large corporates enjoy. For example, an established rental service provider would have secured vendor relationships that can be leveraged on to provide a range of asset options at competitive prices.
Some of the major rental benefits are:
Better use of cash: Rental allows you to focus your cash on business enhancement, rather than business infrastructure.
Save Your Line Of Credit: Renting allows you to preserve the available credit from your bank for additional working capital, operations, expansion and acquisitions. When conducting equipment financing through your bank, you exhaust your available credit.
Flexibility: Being flexible in terms of payments, upgrades and the addition of more technology to meet your businesses needs; means that rental allows you the freedom to expand and grow at your own pace.
Off Balance Sheet Financing: Proper structuring of your equipment rental can result in additional benefits which have immense implications on the businesses profitability.
Rental is fast becoming the finance option of choice for essential business equipment. According to a recent survey, over 80% of all US businesses rent at least some of their equipment; and these businesses range from Fortune 500 companies right down to the corner store. With this been said, it is pretty obvious that the benefits of renting are far reaching.
One of the most important components of placing your essential equipment on rental is that the rental company is in a position to carry some or all of the risks associated with managing the lifecycle of the asset. This leaves you free to concentrate on the real core functions of your business.
When considering equipment rental, the choice of rental partner is critical. Whilst some rental companies act purely as a funnel for sourcing finance, “True Rental” companies offer services that range from procurement, finance, maintenance, insurance, asset management and end of asset disposal. This means that as an SME you can reap the rewards and enjoy the benefits of rental solutions that large corporates enjoy. For example, an established rental service provider would have secured vendor relationships that can be leveraged on to provide a range of asset options at competitive prices.
Some of the major rental benefits are:
Better use of cash: Rental allows you to focus your cash on business enhancement, rather than business infrastructure.
Save Your Line Of Credit: Renting allows you to preserve the available credit from your bank for additional working capital, operations, expansion and acquisitions. When conducting equipment financing through your bank, you exhaust your available credit.
Flexibility: Being flexible in terms of payments, upgrades and the addition of more technology to meet your businesses needs; means that rental allows you the freedom to expand and grow at your own pace.
Off Balance Sheet Financing: Proper structuring of your equipment rental can result in additional benefits which have immense implications on the businesses profitability.
Friday, July 4, 2008
Preserving Cash Flow - a MAJOR benefit
Keeping on the cutting edge of technology is a problem that every business today faces. With technology producers moving ever faster to get the next smallest fastest largest capacity devices into the market place; and software developers jumping on the band wagon as the newer hardware means that more complex instructions can be executed even faster. SME’s and even large corporate organisations are struggling to keep up.
Technology equipment (meaning PC’s, laptops, servers, PABX systems, printers, etc.) depreciates in value from the moment it has been purchased. This means that as soon as the cheque has been signed for the goods, they are already worth less than what was paid for them.
Technology equipment depreciates over a three to five year period. Meaning that the equipment will have a negligible value after this period, and the value that could be recovered from selling the equipment would not be substantial enough to warrant the purchase of the equipment in the first place.
An equipment rental works as a form of asset-based loan. The business arranges a monthly payment schedule with a rental finance company for the use of the equipment over a pre-arranged period of time. When that period ends, the business can return the equipment to the rental finance company and extend the contract to update their entire technology equipment infrastructure.
There are many benefits and business best practices associated with technology equipment rental, these include : Capital Conservation; Off Balance Sheet Benefits; Disposal Cost Avoidance; Flexibility (operational and payment); Maintaining A Competitive Advantage; Credit Line Preservation and Asset Management.
The net result is that rental is becoming more than a financial option for companies. It is becoming a way to streamline and simplify, a way to get more for less, and maybe a way to save oneself for the headaches of heavy administration. And that’s an option worth learning about.
Technology equipment (meaning PC’s, laptops, servers, PABX systems, printers, etc.) depreciates in value from the moment it has been purchased. This means that as soon as the cheque has been signed for the goods, they are already worth less than what was paid for them.
Technology equipment depreciates over a three to five year period. Meaning that the equipment will have a negligible value after this period, and the value that could be recovered from selling the equipment would not be substantial enough to warrant the purchase of the equipment in the first place.
An equipment rental works as a form of asset-based loan. The business arranges a monthly payment schedule with a rental finance company for the use of the equipment over a pre-arranged period of time. When that period ends, the business can return the equipment to the rental finance company and extend the contract to update their entire technology equipment infrastructure.
There are many benefits and business best practices associated with technology equipment rental, these include : Capital Conservation; Off Balance Sheet Benefits; Disposal Cost Avoidance; Flexibility (operational and payment); Maintaining A Competitive Advantage; Credit Line Preservation and Asset Management.
The net result is that rental is becoming more than a financial option for companies. It is becoming a way to streamline and simplify, a way to get more for less, and maybe a way to save oneself for the headaches of heavy administration. And that’s an option worth learning about.
Wednesday, July 2, 2008
Rent vs. Buy Decision
When looking at the Rent vs. buy decision, there are a number of key factors which sway it in the favor of an outright purchase.
The first of these is that the company has the cash freely available and there is no need to look at a rental. Coupled to this is the fact that once I you have purchased the equipment; the ownership is yours and you can depreciate the value of it over time, thus improving your Return On Assets Ratio.
The second major reason which supports a cash purchase is that it is far easier than having to engage with a rental agency signing contracts and reading through terms and conditions.
And lastly, the third major reason why organizations support a cash equipment purchase is because they have had an unfortunate experience with a rental agency and are disinclined to risk this option again and feel more comfortable with a cash purchase.
As a response to this, sound reasoning dependant on an organizations circumstances, can push the balance in favor of a rental solution.
The first of which is cash flow, an organization needs to weigh up the opportunity cost of investing in valuable cash in technology, business infrastructure, or in other areas where they can see a greater return. A rental solution eases the pressure of South Africa’s current economic climate on an organization by allowing them to easily budget for the future and keep much needed cash flowing. On this same point, by making use of a rental solution, the organization is given flexibility to upgrade to the latest equipment as and when needed, instead of having to sweat the equipment for between 5 to 10 years in order to depreciate it to an acceptable level.
When choosing a rental partner, it is important to ensure that you become intimately familiar with, and understand their documentation and contracts as very often a bad experience stems from here. It is Spartan’s (http://www.spartan.co.za/) philosophy to ensure complete transparency of rental contracts and fees in order to ensure that our customer relations are retained and remain healthy.”
The first of these is that the company has the cash freely available and there is no need to look at a rental. Coupled to this is the fact that once I you have purchased the equipment; the ownership is yours and you can depreciate the value of it over time, thus improving your Return On Assets Ratio.
The second major reason which supports a cash purchase is that it is far easier than having to engage with a rental agency signing contracts and reading through terms and conditions.
And lastly, the third major reason why organizations support a cash equipment purchase is because they have had an unfortunate experience with a rental agency and are disinclined to risk this option again and feel more comfortable with a cash purchase.
As a response to this, sound reasoning dependant on an organizations circumstances, can push the balance in favor of a rental solution.
The first of which is cash flow, an organization needs to weigh up the opportunity cost of investing in valuable cash in technology, business infrastructure, or in other areas where they can see a greater return. A rental solution eases the pressure of South Africa’s current economic climate on an organization by allowing them to easily budget for the future and keep much needed cash flowing. On this same point, by making use of a rental solution, the organization is given flexibility to upgrade to the latest equipment as and when needed, instead of having to sweat the equipment for between 5 to 10 years in order to depreciate it to an acceptable level.
When choosing a rental partner, it is important to ensure that you become intimately familiar with, and understand their documentation and contracts as very often a bad experience stems from here. It is Spartan’s (http://www.spartan.co.za/) philosophy to ensure complete transparency of rental contracts and fees in order to ensure that our customer relations are retained and remain healthy.”
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