Finance

Introduction:

The Telecommunications market is the most rapidly growing market in the world today. Keeping pace with technology, continually improving service to clients and improving operational efficiency has become a complex issue.
 
RENTAL FINANCING is aimed specifically at this market and caters for change over a period of time. It is therefore possible for users to expand their systems as needs indicates, and to do so without drastically affecting their budgets and cash flow.
 
Although flexibility is of major importance in any installation, the rental package has further been designed to offer the greatest possible tax advantages, as well as to cater for the high inflation rate in the economy today. Structured financing allows savings in today's money (the most expensive) and then allows inflation to erode the value of money over a period of time.  

Advantages of Rental as opposed to Cash

Rental Cash
  • May escalate installments to suit user
  • Capital outlay up-front reduces Working capital
  • VAT payable monthly
  • VAT payable up-front
  • Interest calculated on a cash prices before VAT
  • Interest lost over period as cash- that could have enjoyed an interest return of its own- is paid up-front
  • 100% tax deductible monthly
  • Deductible by depreciation via balance sheet annually
  • Operating expenses in the income statement
  • Appears in the financials as an asset
  • No capex approval required
  • Capex approval required for purchase of equipment
  • No deposit is necessary
  • Capital outlay up-front
  • Recoupment Tax avoided
  • N/A
  • Off Balance Sheet
  • On Balance Sheet
  • Control / contact with user base is secured
  • Control of user base is lost
  • Improves equity ratio, current ratrio and return on assets ratio on financial ratio
  • Has to be capitalised and has an effect on most ratios
  • Option to upgrade equipment is available free of additional VAT on original equipment and if the same supplier is used for new equipment, a preferential discounted figure is given effectively this is a substantially higher "trade-in" amount
  • Very little or no value is attached to trade in or 2nd hand equipment after a period of about 2 years and there- fore capital would effectively be lost when new equipment is purchased as no return on capital would be recognised.