Industrial - Renewed Group

Industrial Equipment Finance

Technology is rapidly changing in the industrial world today, and user needs continue to grow. Keeping pace with technology, continually improving service to clients and improving operational efficiency has become a complex issue.

It is against this background that specialized financing has become more and more a factor of industrial and technological equipment usage. Existing methods of financing, although adequate, have not addressed the problems incurred in a continually changing market. In order to address these problems, the emphasis has changed from “What it would cost to buy” to “What it would cost to use?”

It was to answer this question that RENEWED was developed and introduced to the industrial and technological markets.

Traditional funding techniques increase your debt, tie up your lines of credit and are treated as capital expenses; furthermore, they leave your company with obsolete equipment at the end of the term. We provide multiple services across all asset types and are committed to delivering a totally professional service and developing customers for life.

When making equipment and technology acquisition decisions you must consider the following:

Will you have the capital budget you need to replace your equipment when it needs replacing?
What is the true cost of capital or other funds that are required to finance both the acquisition and operation of your equipment?
What is the opportunity cost of committing your capital to depreciating assets with diminishing life cycles?
What will your equipment be worth at the end of its useful life? Will the cost of disposal be greater than the value of the assets?

MAIN BENEFITS OF A RENTAL

TAX BENEFITS

Rental is 100% tax deductible as an operating expense
VAT is paid monthly on rental premiums
Reduce your nett taxable income

OFF–BALANCESHEET FINANCING

No long-term liability
Does not affect current gearing and exposure
Only reflect in income and expenditure statement

BUDGET PURPOSES

Part of opex budget – not capex budget
Less budget constraints
Usually no deposits
No cash drainage
Improved cashflow

UPGRADEABILITY

Client can upgrade equipment without capital constraints
Keep up with current technology and improvements on equipment

The following are the salient features of a rental agreement:

End of Term Options

At the end of your rental term you have the following options:

Continue to rent the equipment on a casual basis at the same rate
Re-negotiate a new term on the existing equipment at a discounted rate
Return the equipment and upgrade to new equipment
Hand back the equipment with no penalty or residual payment
Buy the equipment from RENEWED

Payment Structures

RENEWED understands your need for flexibility, therefore, multiple payment options exist:

The Regular Rental Plan, which operates with even monthly or quarterly payments (0% escalation) through the term, which allows you to develop a planned replacement strategy with pre-determined operating cash flows.
The Escalation Rental Plan is a flexible alternative, which sets an annual escalation of 5%, 10%, 12% or 15% in place to maximize budget planning in your organization.

Terms

This can vary, but a five-year agreement is the norm – 12, 24, 36 & 48-month periods are also available.

Escalation

Normally an escalation rate of approximately the expected rate of inflation is built into the rental structure in order to reduce the cost to the user of a particular system and has important ramifications. It takes into account that when considering future rentals, inflation will erode the value of money (the most expensive money is today’s money), thereby keeping the payments equal in real terms measured today.

Accounting

As rental is an operating expense, it is not reflected on the balance sheet, rather it is shown as an operating expense in the income and expenditure statement.

Use and Enjoyment

The Rental concept allows the full use of the equipment, but does not confer right of ownership. A “Rental” may be defined as the uninterruptible use of equipment for a period of time at an acceptable cost to the user.

Through careful planning, our client can enjoy the full use of the equipment at the lowest cost possible. Our intention is to always provide the most cost efficient structure at the lowest possible rental.

Tax Effects

Rentals are 100% tax deductible as an operating expense. The budget is therefore not affected by Capital Expenditure constraints and allows the user flexibility to upgrade within the rental period, or within a fiscal year.

Value Added Tax is not capitalised on the agreements but paid monthly on the rental. This provides valuable savings at the time of upgrade as VAT is only paid for the period the equipment is in use.

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What you need:

A completed & signed credit application form
Pro-forma supplier invoice or quotation
Full description and/or brochure on asset
Copy of ID of directors
A Company letterhead
Copy of company registration documents
Personal assets & liabilities of directors
3 months bank statements
Latest Audited Financial Statements
Up to date Management Accounts