Financing the deal

1 June 2000



How do you go about getting new equipment; beg, borrow or do it sensibly.


So, you've decided to set up, say, an on-premise laundry, good call. Doing your own laundry can save you thousands of pounds a year compared with contracting it out. But how to pay for the plant? There are three different approaches; purchase, lease or rent. With each, there are two elements to consider, the equipment and the service.

You may be fortunate enough to have the capital on hand to invest in the project. The equipment may be protected by a manufacturer's warranty, but this could vary from a few weeks to one year. Clearly, since you expect your equipment to last more than a year, you will be well advised to protect yourself with an extended warranty. Be sure to ask who will carry out the service and be sure it is a reputable company. Will it be the manufacturer, the distributor, or as sometimes happens, is the service sold on to a third party? Is the service included in the equipment cost? In which case, what happens if the service agent goes out of business? In the case of an extended warranty, it is sometimes necessary to pay for the repairs up front before reclaiming the cost from the insurance company, who may dispute the claim or take overly long to reimburse you.

Leasing is an attractive alternative, but once again, check on the service arrangements. The service costs are often added to the cost of the lease and may be sold on, without any reference to yourself. Beware the small print. Many service contracts have numerous exclusion clauses. Also, what happens if the equipment gives up the ghost before the lease ends? You are still committed to paying for equipment that you are not able to use. Likewise, should your circumstances change, you will not be allowed to alter the equipment or upgrade it.

Rental is a way for customers to use assets without owning them. It represents a sensible alternative to investing capital in laundry equipment, which depreciates over time. Regular rental payments cover equipment supply and all aspects of service including parts and labour.

Beware companies that offer rental schemes financed by a third party. Beware, too, companies where the service is sub-contracted. Should any one of the parties go out of business you may be left high and dry paying for services you are not receiving. Rental usually means that equipment beyond economic repair is replaced, under the terms of the contract. Choose a flexible contract that suits your circumstances. These valuable tips were supplied by Les Marshall, director of sales for Warner Howard .



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