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RENTALS
Rental finance is a cost effective way of allowing a company the use of an asset without having to outlay the full purchase price upfront, achieving maximum tax benefits and at the same time being able to track technology changes.
The rental system ensures uninterrupted use of equipment for a set period of time, at an acceptable cost to the company. When entering into a rental agreement, the company agrees to pay a monthly rental for a set period of time. This period can range from 36 to 60 months (3-5 years) and the monthly repayment can be structured to suit the company`s requirements.
Benefits of rental finance to a Company:
Off Balance Sheet Financing: This means the rentals do not appear as an item on the company's balance sheet. As the equipment is rented it appears on the income statement as an operating expense rather than a fixed asset. This in turn does not affect the user's cash flow or future borrowings from their financial institutions.
Tax Advantages: The monthly rental payment appears as an operating expense on the
Company's income statement and is fully tax deductible. VAT is not capitalized against the purchase price, therefore interest is not paid on the VAT portion. Rental finance charges are calculated on the purchase price excluding VAT and thereafter VAT is added onto the monthly rental payments.
Conservation of Working Capital: As no deposit or initial lump sum payments are required, rentals offer a low entry level cost, reducing the use of the Company`s working capital.
Convenience to the Company: Rentals, due to its` off-balance sheet nature requires much less bookkeeping that an outright purchase and other conventional forms of financing. Purchased or leased assets must be capitalized. Depreciation and finance charges must be calculated on lease. All of this requires time and effort and leads to more accounting expenses.
Flexibility: As the constraints of the Ursury Act do not affect rental agreement structures, the terms are limited by the economic lifespan of the equipment and the end users budgetary constraints.
Eliminate Risks & Cost of Ownership: Due to the speed in change in technology and communication platforms, the development of conventional technologies and the requirement to access and provide more information faster - most technology drops dramatically in value from the day it is delivered and installed. This poses the possibility of companies having to use outdated equipment or potentially having to write-off the equipment. By using our rental agreement the company has the benefit of using their chosen technology without the risks and costs associated with its ownership.
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