As a contractor or supplier to the construction and earthmoving industry, at times you’ll face a tricky ‘chicken or egg’ situation: what comes first – the contracts or the equipment?
In a tough economy and without a backlog of work lined up, how do you justify spending $60,000 on an excavator? The majority of small to medium business owners just don’t have enough cash to buy expensive construction equipment outright.
Outside of traditional bank loans and hire options, you may not be aware of other avenues in the market to help you build your business. Although the terms ‘rent’ and ‘hire’ are often used interchangeably, GoGetta’s Rent-to-Own solution is unique.
Rent-to-Own: GoGetta buys the equipment on your behalf and rents it to you. You make regular rental payments and have a number of options, including purchasing or returning the equipment.
Hire: The equipment hire company owns the equipment and you hire it from them for as little as an hour or several months. You return it when you’ve finished using it.
Warwick Bates, owner of fledgling landscaping business, Greencorp Landscape Solutions, said he won three large tenders from the Gold Coast City Council (GCCC) due in large part to the equipment he had already acquired through GoGetta.
“The work piled on and as I expanded, I picked up piece after piece of equipment through GoGetta, probably one every two months or so,” he said.
“I thought I could wait for the council tenders to come off without any equipment and get this later, but that wouldn’t have been the case.”
The similarities between renting-to-own and hiring include:
- NO OR MINIMAL CAPITAL OUTLAY: Neither renting-to-own nor hiring requires a large capital outlay, helping you preserve your cash flow: the single most important factor to your business’ survival
- TAX DEDUCTIONS: Rental payments and hire fees are operating expenses, which are 100% tax deductable*.
- ‘OFF BALANCE SHEET’: Rental payments and hire fees do not appear as a liability or debt on your balance sheet. In other words, your ability to borrow more money is unaffected.
- QUICK & EASY APPLICATION: Depending on availability, you can get your hands on hire equipment within 24 hours. Similarly, a rent-to-own agreement can be processed within a day and the equipment delivered within a week.
- TRY BEFORE YOU BUY: Hiring allows you to try equipment before deciding whether to buy it. GoGetta’s rent-to-own funding solution allows you to try equipment and, if it’s not entirely suitable, return it to GoGetta after 12 months without penalties.
How do the costs of rent-to-own and traditional hire compare?
When it boils down to cost, which option comes out on top? We looked at the costs of hiring and renting-to-own three commonly used pieces of equipment, including:
- A skid-steer loader (large)
- A mini-excavator (5 tonnes)
- An excavator (20 tonnes)
*GoGetta does not provide legal, tax or accounting advice. Please seek professional advice from a qualified person.