In a dynamic business climate that hastens the need for revenue producing commercial equipment among mid-sized and large companies, meeting the financial and operational demands can be challenging. The expense of commercial equipment is outpacing capital budgets and customer contracts require increasing flexibility to stay competitive in a global marketplace. Financial, operational and procurement managers might struggle to strike the right balance between short and long-term equipment needs. Let’s unpack these issues and propose an alternative.
Rental: The high cost of flexibility
Commercial equipment rental fills an important operational function for many companies. Whether a seasonal surge in warehouse activity or maintenance replacement, rental offers a flexible way to acquire the needed equipment with the flexibility to return the equipment when the short term situation passes. But what happens if the need for the equipment is a bit more undefined? What if the length of usage could extend beyond a few months to even a year or more? In these situations, while rental will still offer return flexibility, it comes at a premium price. Carrying that premium month after month becomes an expensive way to achieve flexibility.
The inability to commit to “long term”
The lowest cost way to acquire equipment is by taking a longer view. Owning, leasing or otherwise financing equipment with a 5-7-10 year or more horizon can dramatically improve cash flows and cash position. But what happens when the customer contract is only 22 months? What if what you thought was a temporary increase in volume is starting to feel a little less temporary—but not quite permanent? Paying cash for equipment ownership, in addition to cash flow and other problems, becomes a poor option because you become the owner of equipment for a still yet-to-be-defined need. Bank loans are a more affordable way to acquire the asset, but essentially deliver the same “long-term ownership for a “shorter-term” need conundrum. Leasing from a financial services company is affordable but essentially the same as a bank loan in terms of the payment obligations and its requirement to cover the total cost of the asset. So, how can you strike the right balance for your short and long-term needs?
The solution: The equipment-driven leasing partner
Shockingly, most equipment leasing companies know startling little about the equipment they are leasing. They have evolved into a “money-center” lender that is simply looking for yield above the cost of their money. They have little knowledge of the equipment market, resale values and would have little knowledge of how to handle the equipment should it be returned. But there are few equipment-driven leasing companies that break the mould. Their value proposition is driven from the deep experience in the purchase, finance, management, sale and disposal of commercial equipment, bringing solutions that go beyond financing. These partners offer mid-sized and large companies a more intelligent approach. One that offers rental, short-term leasing and long-term leasing and more to meet a wide variety of needs across a wider variety of commercial equipment. They can match the lease to the shorter customer contract or offer the financial benefits of longer term leasing with flexible turn-in provisions. And they are able to do this, because they know the equipment, how your company deploys the assets and can create unique solutions the “money-centered” folks overlook.
For more than 30 years, the Somerset family of companies has redefined equipment finance. We take our clients further by providing services around the financing of equipment for mid-sized and large companies throughout the Americas, Asia and Europe and offer finance solutions that can help you meet your dynamic equipment needs. We help you think bigger and go beyond finance. Let’s talk.