Urban Farming at ETHOZ ROOF GARDEN

As a small city-state with limited land resource, Singapore depends heavily on imported food supply. Only 1% of land in Singapore is available for food production, and over 90% of food is imported. The importance of food supply resilience was highlighted during the Covid-19 pandemic, where the international food supply chain was put on the line as nations went into lockdown globally. In times of food supply chain crises like these, local food production acts as an important buffer.

Food Security in Singapore

The Singapore Government has set a goal for Singapore. To effectively buffer from supply disruptions, Singapore aims to produce 30% of its nutritional needs by 2030.

“The practice of urban farming has picked up in scale and sophistication globally in recent years. In Singapore, we encourage innovative urban farming approaches such as rooftop farming, which optimises land, introduces more greenery into the built environment, and potentially enhances our food supply resilience,” said an Urban Redevelopment Authority (URA) spokesperson.

At ETHOZ, we believe in embracing innovation to build a sustainable future. With this in mind, we have embarked on our Hydroponics farm on the rooftop of our headquarters office building.

Hydroponics setup at ETHOZ Rooftop Farm.

Why Urban Rooftop Farming?

Rooftop spaces are unutilized land space.

Bare roofs in cities absorb and radiate heat — a phenomenon known as the heat island effect. This increases energy usage and contributes to poorer air quality. Rooftop farms acts as a cooling system for buildings, reducing carbon emissions.

Taking advantage of natural sunlight on the rooftop instead of using artificial light equates to healthier vegetables with lower production cost.

By growing food locally, we are also able to lessen the environmental impact of food transportation. The energy sources used in the transportation of imported produce are eliminated.

The trim in farm-to-table transportation time also means that vegetables produced locally is fresher as compared to imported produce.

Pesticide Free Produce

As urban farmers, we take great care to ensure the welfare of both our consumers and our environment.

Pesticides are traditionally used to protect crops from pests. However, the downside of pesticides are its chemicals and heavy metals components. These lead to health and environmental issues in the long run.

At ETHOZ, we grow our vegetables using a hydroponic nutrient solution with a fully-biodegradable foam substrate.

ETHOZ uses fully-biodegradable plant foam substrate for seedling germination and plant cultivation.
Bok Choy grown at ETHOZ Rooftop Farm.

Variety of Produce

At ETHOZ Rooftop Farm, we cultivate a variety of vegetables. The range includes vegetables commonly found in supermarkets all over Singapore, from Chinese greens to salad greens.

List of vegetables (at time of writing, subject to changes):

 

  • Bok Choy or Xiao Bai Cai (小白菜)
  • Milk Chinese Cabbage (奶白菜)
  • Chinese Kale (芥兰)
  • Choy Sum (菜心)
  • Siberian Kale
  • Green and Red Batavia
  • Romaine Lettuce

Our Growth Process

The entire growth process from seeding to harvest takes around 50 days. 

Our staff are actively engaged in this Urban Farming initiative. Each of our departments takes charge of one to two varieties of vegetables, from farm-to-table. From the hands-on process of planting the seedling all the way to the tasting of our harvest, it was definitely a refreshing and enjoyable team-building activity for urban office workers like ourselves.

Briefing from our supplier on best practices for the growth of our vegetables.

Germination usually takes 2 to 3 days.

The seedlings are placed in the nursery for around 7 days.

Next, they are transferred to the growth racks for 35 to 40 days.

Look at how our vegetables have grown!

A closeup look at the vegetables

Racks of thriving vegetables ready for harvesting!

Our Harvesting Process

We are experimenting with growing different varieties of vegetables to determine which are most suitable for hydroponics growth, as well as most popular in taste.

For our first few harvests, we have shared our fruits of labor with our shareholders, directors and staff.

Our harvests have been well-received thus far, with feedback gathered being fresher and more moist as compared to packaged produce commonly found in the supermarkets.

Our various departments having fun harvesting our vegetables.

Our harvested produce.

After harvesting, the next step is to wash the vegetables.

Our final product ready for distribution!

Future Developments

Moving forward, we are looking to expand our rooftop farm from its current location at the seventh floor rooftop area to our eighth floor rooftop area, a total of approximately 8000sqft. With the installation of new racks, our harvest is expected to increase from 70kg to 400kg.

We are also in the midst of exploring partnership with local charity distribution organisations.

Our next step in the direction of environmentally-friendly initiatives include looking at the installation of solar panels on our rooftop.

We look forward to sharing our exciting future updates with you, stay tuned!

How Working Capital Management Can Improve Profitability

What is Working Capital?

The lifeblood of a company is cash. To be more exact, liquidity. Working Capital or Net Working Capital, simply put, is a financial metric which tells us whether a business has enough funds to meet its short-term expenses and financial obligations. It is these funds that enable a business to stay IN business, as it allows the owner to pay of its suppliers, to pay rent, utilities, without which there would be no premises to work from, no raw materials to produce products and no place to provide services.

Aside from commercial ventures, all other kinds of organisations ranging from kindergartens to government bodies and even charity are rightfully concerned about managing their working capital needs. A clear illustration of working capital these days is countries needing to borrow money, downsize its operations or collapsing totally if it cannot find a lender. If a country or company cannot pay its bills, they take a loan. This can be from the International Monetary Fund (IMF), from individuals through bond issuance or even from sovereign funds. As witnessed in the recent US debt-ceiling crisis of 2011, the inability to cover its short term liabilities results in necessary spending cuts or downsizing. Prolonged negative working capital where there is insufficient money to pay its current liabilities can lead to insolvency as we have seen during the bankruptcy of Iceland during the 2008 financial crisis when bank lending halted. We have also seen this lately with countries in the region. On a different scale, businesses face the same prospects with bad working capital management and good capital management is just as important to companies as they are to countries.

 

 

The Importance of Working Capital

Working capital is important because it determines an enterprise’s going concern. It affects many aspects of a business from being able to keep the lights on to paying out salaries. Most importantly, it also determines a company’s long-term sustainable and healthy growth. Improper working capital management can lead to insolvency, which may result in loss of control if taken into receivership. Insolvency can also lead to personal liability on obligations such as loan payments. A court could order garnishment of personal property, and future loans (whether personal or corporate) could be difficult to obtain due to a diminished credit rating. The consequences could potenially be far-reaching.

As a metric, working capital provides a broad look at the direction in which the company is heading over time, usually a period of 1 year. It tells the entrepreneur if the business has been successful or not. It also signals if any rectification is needed, or if there are better ways of utilising the company’s liquidity. As a flow variable, as opposed to stock, working capital is more closely related to the balance sheet and information from it can be used to determine if a business can continue operations or is facing insolvency. However, it is only a broad indicator and further investigation into its components would tell a deeper story. For example, if current assets consist of financed capital such as loans, then a business owner has to consider if the borrowed money is efficiently and effectively deployed or if it is just sitting idle. In such a scenario, there is an impact on the company’s Profit and Loss through interest expense incurred on the loan. The prudent businessman would have to evaluate if the loan generates a level of operating income to justify the interest paid. This is where active working capital management comes in. Now that the importance of working capital is established, let’s look at how it is calculated and what it can tell a business owner about the health of his company and how he should act.

 

 

How to calculate Working Capital?

Working capital, or specifically net working capital is calculated as: Working capital = Current Assets – Current Liabilities. Current Assets are a total of the accumulation of the liquid and near-liquid assets of an organisation. It represents all the assets that can be encashed rapidly: cash, accounts receivable, prepaid liabilities, inventory, marketable securities and short-term investments such as fixed deposits and certificates of deposit (CDs). Current liabilities, on the other hand, are obligations that have to be paid in cash within the fiscal year.

Determining which items are to be included in the list of current assets and current liabilities depends on the size of the company, which industry it is in, and how conservative the finance wants to be. In essence, this decision sets up the bench mark at which the company operates.

 

 

Permanent Working Capital

This takes into account the absolute minimum amount of cash required to run a business. They are funds that are constantly tied up in current asset items like inventory and the daily cash needs, without which, the business would not even be able to start up at all. This amount of working capital would not be freed up under normal circumstances unless there are any divestments or the company is being wound down.

 

 

Regular Working Capital

Regular working capital further considers what the business needs for its daily operations. For example, this could be the inventory that a shop needs or the cash to pay for staff, inventory, utilities, rent and to keep in the cash register for giving change. If this measurement falls negative after deducting all these expenses from revenue, it means that the enterprise is bleeding cash and cannot maintain its obligations in the long run. Its survival would be called into question.

 

 

Reserve Margin Working Capital

Business cycles often deal shocks that some companies do not emerge from. In addition to day-to-day activities, businesses need to cater for unforeseen circumstances. Reserve margin working capital is essentially a fund kept aside for rainy days such as the recent Covid pandemic.

 

 

Variable Working Capital

When opportunities come knocking, it pays to be able to react quickly to grab them. During this period there would be temporary costs and to absorb these costs, current assets need to be increased through available sources such as loans.

 

 

Seasonal Variable Working Capital

Certain industries are inherently cyclical in nature such as retail where festive occasions usually bring in more sales. These periods may require extra working capital to meet increased demand, especially if the business needs to ramp up production or its sales inventory.

 

 

Special Variable Working Capital

Similarly, supplementary working capital is funds needed to capitalise on exceptional or unforeseen opportunities. These could be one off situations like promotions, fire-sales, or even calamities like floods or fires.

When the components have been established, analysts would like to know whether the net working capital figure is negative, positive or nets out to zero. A negative figure means that the company is not able to cover all the payments it needs to make in the short term. This suggests that it is over spending, or that an investment made is not generating a good return. A result of zero is slightly less pressing but it still suggests that the business is barely breaking even. There is no leeway to take on additional burdens, even though these immediate investments may bear fruit in the future. A positive figure may not generate panic but the question of whether the excess funds can be made more productive has to be thought through.

Looking at a single is not enough. The same components can be expressed as the “current ratio”, which takes current assets and divides it by current liabilities. Other measures of liquidity like the quick ratio and net cash flow should also be viewed in conjunction with working capital. To serve as a benchmark in determining whether the magnitude of the calculated is a good or bad result, it has to be compared with the average for that particular industry.

Day sales outstanding which refers to the average number of days it takes a company to collect payment after it makes a sale, the collection ratio which is the average amount of time that a company would be able to collect its trade accounts receivables and the inventory turnover all provide further insights to the net working capital calculation. These metrics come as a set and provide an answer on what went wrong and how bad it is.

 

 

Reasons Why Businesses Require Additional Working Capital Grants

Businesses first want to survive and then to grow. There are several reasons associated with these objectives that require additional working capital. Often, working capital loans are taken to fund the day-to-day operations of a business. This can range from covering the month’s wages to settling accounts payable. Some businesses are cyclical and go through periods of lower operational cash flow, so sometimes the need for capital to keep the operations going may arise. To survive, a business also needs to be able to weather accidents, financial downturns or natural disasters and might need additional working capital. To expand, additional working capital might be needed to acquire larger premises, rent equipment, to hire additional staff or purchase machinery to improve efficiency.

In such cases, a company needs a cash boost fast. Working capital loans can provide this quick cash top up. Typically, these are unsecured and one does not need to put any assets on the line, it can help improve cash flow, there is no risk to company equity and best of all, there is freedom to decide how the money is used. Aside from banks, other private financing companies such as ETHOZ also offer business solutions such as these. The facilities provided are often much more competitive than traditional lending sources. New businesses that have little or no financial records can avail themselves of much needed funds, often with more flexible terms.

 

 

How to Boost Working Capital?

Boosting working capital is as simple as taking a loan. These cash injections immediately increase net working capital. Secured and Unsecured term loan, hire purchase, and equipment leasing could be used to obtain equipment necessary to expand operations. Corporate financing is available at ETHOZ for expensive office equipment like laptops and printers, where the monthly payments are a lot more manageable than a heavy cash outlay to make purchases. The Biz-Growth Loan offered by ETHOZ is a type of Unsecured Term Loan which can be used for such purposes. The benefit is that such unsecured loans are more flexible as they do not require any kind of collateral.

Likewise, property loans and renovation loans inject liquidity into the companies’ books and at the same time frees the owner from making large front-loaded payments.

In Singapore there is a wide variety of financing options available to suit the needs of businesses. Some of these include:

 

 

a. Unsecured Loan

Such loans do not require collateral and rely on a borrower’s credit worthiness. If a borrower defaults on payment, the lender cannot claim any property. However, it can employ the services of a collection agency or seek court action. As a result, unsecured loans usually require a higher credit worthiness score or have higher interest rates. In some cases, a guarantor or cosigner might be required. The difficulty is finding someone who will fulfill this role, as the guarantor is fully liable for repaying the loan in the event of a default.

 

 

b. Secured Loan

In contrast, borrowers taking out a secured loan can pledge high value assets such as property, vehicles, bank savings, investment accounts or even account receivables.

The benefits are that the borrower can have access to more funds, often at a better interest rate and terms as compared to unsecured loans. Collateral also makes it possible for those with lower credit scores to get a loan.

 

 

c. Hire Purchase

Hire purchase refers to assets such as machinery and vehicles where there is the option for the legal transfer of ownership to the borrower. The advantages of such a loan are that the asset serves as a form of collateral and interest rates are generally lower than with unsecured loans. There is also the opportunity to refinance the loan or to negotiate a reduction in the interest rate or an extension of the loan tenure to make repayments more manageable if the need arises.

The downside is that the asset can be repossessed if there is a default and no agreement can be reached.

 

 

How Working Capital Relates to Profitability

At the end of the day, every business’s primary concern is profitability. Effective working capital management ultimately leads to profitability. It provides the tools to monitor solvency and liquidity ensuring that daily operations are profitable and that future operations continue to be profitable through the ability to plan for business expansions.

 

 

 

 

 

Additional Fees to Look Out For When Renting a Car

Having a car to use is the ultimate expression of freedom. Being able to go anywhere, at any time is a kind of independence afforded to the more mobile. Renting a car is a good way to experience this at a low cost, especially if you are overseas on a holiday or on a long-term job posting. However, it can also turn out to be an unpleasant experience if you do not understand the fine print of the contract on a comprehensive level. Do not forget to do a quick scan of the details as the fine print may result in a rude shock involving hefty fees that could have been avoided. To shed light on these hidden costs, here is a list of some of the common fees.

Rental Car Insurance
Insurance charges1 can be a huge bugbear as well as a source of confusion at the same time. Most of these arise from not fully understanding what is covered and what is not. All cars must have motor insurance coverage to be used in Singapore. The basic minimum insurance required is a third-party cover. This covers your liability to other people involved in a collision but not car damage.

The car rental company will already have purchased the rental car insurance before providing the car for rental. This insurance coverage comes with an Excess that is payable by the Hirer when the rental vehicle is involved in a collision. The excess amount is determined by the rental company and the Excess amount varies depending on several factors such as location of the accident (Singapore or Malaysia), age and the type of rental car. If your rental car is damaged during the rental period, you are liable to pay the excess amount to cover the cost of damage and repairs.

Other additional insurance options you could be offered when renting a car are: (1) collision damage waiver, and (2) personal accident insurance.

Collision damage waiver (CDW) is an additional insurance coverage that a rental company offers you when you rent a car. This waiver is optional, and the cost of the waiver depends on the type or engine capacity of the rental car and where the car is being driven. This waiver limits your financial obligation if the rental car is damaged in a collision. Should you decide to include the collision damage waiver in your rental package, an additional daily fee on top of the rental car fee applies.

The Personal Accident Insurance provides coverage for medical costs, emergency care and accidental death during the rental period. However, it may cover either the driver or both the driver and passengers.

 

Additional Driver Fee

An additional driver can be any person registered and permitted to drive the rental car during the rental period in addition to the renter. To register an additional driver, many rental companies charge an additional driver fee.

The additional drivers must meet the same requirements as those of the renter which includes the driving license and age eligibility criteria to drive the rental car. The additional drivers’ names must also be added to the rental agreement.

The most important thing to note is that all additional drivers must be approved by the rental company. There will be no insurance coverage for any additional driver(s) not approved by the rental company.

 

Security Deposit

Majority of the rental car companies charge a refundable security deposit. The deposit is a determined sum of money requested by the rental company just to ensure the renter takes good care of their car. If the car is returned very dirty or with scratches, the company may use the money to repair the car. It is simply a guarantee to the company just in case something goes wrong during the car rental period. After the rental contract expires and the car is returned, this sum of money will then be fully refunded.

 

Costly Extras

Need a child seat or GPS device? Be prepared to factor these into the daily car rental rate3. The price of this convenience could well cost as much as buying them to begin with. Therefore it is recommended that you plan ahead and calculate your sums and make a comparison to a direct purchase of these extras to see which option makes more economic sense.

 

Peak Timings

Peak periods such as weekends and public holidays drive rental rates higher. Planning early to book in advance or to avoid the peak periods can help to save money significantly. However, do not write off peak timings entirely. Do keep a look out as car rental promotions are advertised for festive periods from time to time.

 

Damage Charges

That paint chip when you hit the door while opening it, the scratch on the windscreen caused by a pebble that was kicked up by the truck in front or even a deep gash on the paintwork can rack up the final bill, even if it was someone else’s fault.

Sometimes, renters might dispute these charges which then makes it important to have documented the condition of a vehicle’s interior and exterior upon acceptance of the car. This would help to provide proof in the event of any disagreement. So do remember to take photos for reference before taking over the car and at the end of the rental.

 

Convenience Charges

To top it all off, there is a catch-all category of service charges and convenience charges that could apply. These include sending the rental vehicle to a specified pick-up location or if the rental car is returned at a place that is different from where it was collected. Of course, there are always some exceptions that some rental companies do go above and beyond for enhanced customer satisfaction. They may offer complimentary collection and delivery of the rental car or delivery of replacement vehicle when the rented car requires servicing or when an accident occurs.

Most rental contracts require the renter to fill up the fuel tank at the end of the rental period. This is usually full or to the same level when the car is collected at the beginning of the rental period. It is also clearly stated in the contract that the renter is fully responsible for all fines incurred during the length of the rental contract. If these terms are not abided by, the cost of fuel top up or fine will be charged to the renter with a service fee.

When COE premium hits sky-rocket high, renting a car in Singapore has become much more affordable than owning a car. The allure of a low daily base rental price is often enough to convince a potential customer to go ahead with car rental. To be fair, it can often be a great option that does not break the bank. Comparing rental or leasing to traditional car ownership further highlights its benefits. There is no need for a hefty down-payment, no loan or upfront payments of one’s hard-earned cash. This gives a renter greater financial flexibility for other much needed priorities.

What differentiates an excellent car rental company from the masses is in its level of customer service. A customer centric company quickly rises above the rest and it would be no surprise that satisfied customers make choices that benefit them the most. A prudent, savvy customer should not only know about the additional fees involved but also which is the right company to rent from. Being a market leader with over 40 years of dedicated car leasing experience since 1981, its experienced teams are well equipped to advise clients on solutions customised to suit their needs. ETHOZ is a one-stop service centre for both corporate clients and individual clients. With one of the widest range of available car makes and models under one roof, ETHOZ is definitely the multiservice, and trustworthy choice for anyone who wants to lease or rent a car in Singapore.

Mercedes Benz Servicing: How To Tell If Your Mechanic Is Overcharging You

With its well-refined, majestic lines, a Mercedes car has always evoked desire in both drivers and passengers alike. The epitome of a superior, classy, almost aristocratic continental car, Mercedes has always been particularly adept at turning heads, from the understated elegance of an A-class to the stately S-class. However, the exclusive standing which it confers to its owners comes with a lofty price tag. Owning a Mercedes often costs more to acquire, when compared to Japanese makes of the same vehicle class. There is a premium on the cost price, servicing and repairs are likewise more expensive. A routine servicing for Mercedes under Service A and B costs between SG$250 to SG$500, while major servicing costs up to SG$1,200.

With repair expenses taking up a large proportion of the cost of owning a Mercedes, looking for a reliable Mercedes Benz servicing workshop is paramount. The difference between a trustworthy garage versus one that is not, could well be a wallet that is several thousand dollars lighter. The primary concern of all workshops is to generate profits and some may employ methods that range from the ubiquitous upselling marketing spiel to short changing customers on the services it offers.

Here are some ways that your Mercedes workshop could be overcharging you.


Topping off Fluids

Changing the engine oil is recommended for every 10,000km travelled or every 6 months, whichever is earlier. However, this rule of thumb has not kept up with advances in oil and lubrication technology. These days, engine oil can last between 10,000km to 15,000km before it has to be replenished, even for a continental car like the Mercedes which can run up to 20,000km between oil changes if synthetic oil is used. This, however, is not the main ruse. Since most cars come in on a regular basis to change the engine oil, it’s the perfect time to package the sale and refill other fluids such as coolant flushes, trans flushes, power steering flushes…. That is where the cost adds up.

It is important to recognise that the customer can choose to reject these services and if they are accepted, it is perfectly alright to request to have the empty bottles afterwards. This is to ensure that the specified genuine brand and quality of fluids are used, and that a new bottle was opened for this purpose. Otherwise, a cheaper alternative brand could be utilised or in certain cases, the leftovers from previous customers could be re-used.


Unnecessary Changes

Most people send in their Mercedes for servicing and choose between one of the three packages. However, each of these contain a predetermined list of items to replace. These include the oil filter and the air filter which may not be totally worn out yet. It is also at this point that other items such as the spark plugs, brake pads, gaskets, drive belt or even tyres are accessed and recommended for replacement.

Asking for the replaced items just to check the state of wear and whether it is appropriate to be discarded, as well as knowing some basic knowledge about car maintenance would go a long way to determine if the workshop is trying to make a little more money out of you.


Installing New Parts

Often, being informed that certain car parts have to be changed are accompanied by unpleasant warnings of what further damage could result if the same parts are not changed. Sometimes, this can be innocuous like driving with a damaged CV boot which initially manifests itself as an irritating squeaking sound when the car is driven but can result in much more serious and expensive damage. Changing the items outright is the most conservative solution but there are several other options that are much cheaper such as repairing the damaged part or sourcing for generic replacements.

How many times have drivers gone into a workshop for minor issues and been diagnosed with multiple expensive problems? It is not uncommon amongst dishonest mechanics to fabricate phantom car problems. Often, seeking a second opinion is a good way of putting one’s mind at ease as to which decision to take.


Harvesting Parts

The stories recounted read like an urban legend. When visiting an unfamiliar workshop, a dishonest mechanic could swap out your newer parts with older ones, only to sell yours at a higher price later on. Similarly, inferior parts or refurbished parts could also be installed and your newer ones taken out. A different spin on this trick is installing used parts and selling them as brand new.


Phantom Charges

Charging for work not done is one of the most egregious examples of dishonesty that can happen. This can apply to the charge for parts that were allegedly installed when none were put in and also for the labour charges on work that was not done.

The only way to avoid such scams is to visit reputable Mercedes Benz workshops or build up a relationship with a trustworthy car workshop offering Mercedes Benz services.


Overcharging

This is a little hard to justify but being aware of competitors’ rates can help with making a choice on which workshop to visit. In many instances, overcharging is most effective when you are caught in a situation without an alternative. For instance, vehicle towing services are required when there is an accident, or if roadside assistance is necessary due to a faulty battery. In this case, the driver will have no choice but to accept any brand of battery, even if the price is inflated.

At the very heart of the matter, is trust. With shady mechanics, they first confuse you, then they distress you, and finally they overcharge you. Very often, most would be none the wiser therefore, it always pays dividends over the long run when you entrust a vehicle to a dependable workshop. ETHOZ, having offered Mercedes-Benz servicing for many years, prides itself on being a credible, knowledgeable and quality-assured automotive partner. At its service centers, Mercedes-Benz owners can be assured of premium service at reasonable package rates, with even more savings and perks as a member. Its comprehensive, up to 39-point vehicle health check has the same stringent standard applied to its large fleet of vehicles that has formed a significant portion of its leasing business for over 40-years. It is this long-standing assurance of excellence provided by ETHOZ’s skilled team of automotive experts that sets every client’s mind at ease.

5 Common Problems Every Commercial Vehicle Owner Faces

Interest rates are rising, COE prices are up, inflation is soaring and oil prices increases are simply merciless. For some businesses, these hit particularly hard, especially those where transportation is a main or even ancillary part of work and owning a fleet of commercial vehicles is crucial. These transportation costs comprise expenses associated with the movement of raw materials, finished goods, or retail products to customers and businesses. Direct costs such as fuel, maintenance and payroll are the primary components but also indirect costs like support vehicles and structures, distribution networks, and other overheads. Of these, the biggest problems a commercial vehicle owner would face come with the high upfront cost of building a fleet and maintenance costs. This is because either of these issues would mean a stoppage of business. Engaging a third-party company specialised in truck rental or commercial vehicle rental in Singapore would go some way towards managing these costs but otherwise, here are 5 common problems that keep commercial vehicle owners awake at night.

 

1. High Upfront Cost of Acquisition

As of May, 2022, COE for commercial vehicles stands at SG$51,0002, having been on a mostly steady climb for the past 1 year. Based on a brand new light commercial vehicle (LCV) such as the popular Toyota Hiace, listed at about SG$55,0004, a business owner is looking at forking out a whopping SG$106,000 on average per vehicle. This quickly multiplies when building up a fleet of vehicles. Using a commercial vehicle rental company would be a viable solution, as it frees the business owner from large front loaded cash outflows and breaks it down into smaller payments. An added benefit is that contract lengths can be customised so whether the lease duration is for a couple of months or years, it is equivalent to paying for a vehicle according to usage. This added flexibility can be liberating, especially in economic downturns where downsizing may be vital for survival or if exploring a new business venture.

 

2. Rising Interest Rates

Borrowers beware! The US Federal Reserve announced earlier that interest rates would be raised5 and promptly increased the Fed funds rate by 25 basis points. It was also said that interest rates would be increased 6 more times in 2022 and that 3 more were planned for 2023. This typically has a knock-on effect on borrowing rates in Singapore as well6. While leverage is one of the most common ways to finance a new or used commercial vehicle, those choosing to borrow to buy a van or truck will be offered car loan packages with ever higher interest rates with each Fed rate hike. A pertinent point to note, is that car loans come with fixed interest rates. This means that once accepted, the interest rate is locked in for the duration of the loan. This can be a good or bad thing, depending on the prevailing rising or falling interest rate environment.

 

3. Finding the Right Employees

Staff turnover can be a real show stopper. Without properly qualified or properly experienced staff to operate commercial vehicles such as panel vans and even larger trucks, business operations would come to a halt. Drivers need to be educated in taking care of the vehicles under their charge. Reckless driving or failure to give due care to its daily upkeep can easily diminish the life of a vehicle. Simple things like dragging gears and driving at a high RPM can put undue strain on engines. Not slowing down on uneven roads can damage vehicle suspensions too.

 

4. Breakdowns

Time is money to businesses, and every second lost is an opportunity cost. Breakdowns result in the vehicle being immobile and disrupts operational efficiency, resulting in loss of income.

Some of the most common causes are listed below.

Commercial Vehicle Breakdowns

Overheating can severely damage your van’s engine. It does not immediately cause your vehicle to stop working so if the driver ignores the overheating alert and keeps on driving, eventually the temperature under the hood would rise to the point where extreme heat warps the engine cylinders and pistons. Once this happens, the engine is a total loss.

A Flat or Damaged Battery causes ignition problems and malfunction of the vehicle’s electrical systems – the vehicle cannot start, or the engine starts then quickly dies, the headlights flicker amongst other signs. Although it can easily be rectified by changing the battery, it still takes some time to buy and install one.

A Faulty Alternator is related to a flat battery but much more serious is a defective alternator. Without one in working order, the battery that is used to start the vehicle and power the electrical systems will not work.

Electrical Problems come in a variety of flavours but they all spell trouble. A fatigued starter or solenoid, bad battery cable, blown electrical fuses or failed spark plugs can all cause a car to fail to start.

 

5. Maintenance

Maintenance costs can add up especially when managing a fleet of several vehicles. Aside from the expenses, it takes time away from its essential functions in the business. However missing servicing appointments could lead to greater mechanical problems down the road. It is a catch-22 situation that puts any business owner in a bind.

 

Maintaining Commercial Vehicles

Vehicle Inspections are a required part of vehicle ownership. It is a government mandated inspection regime that ensures that vehicle owners properly maintain their vehicles up to operational and emissions standards.

Servicing is a self imposed regiment that aims to mitigate potential mechanical failure and extend the service life of the vehicle. This averts the situation in which a vehicle is not repairable and lessens business disruption.

Tyre Replacement is recommended when the tyre thread reaches the minimum depth. Age, as well as usage determine if it is time to buy a new set of tyres. Using worn out or old tyres can be dangerous due to the compromise of the wheel’s structural integrity and traction.

Worn Gaskets, Seals and Valves form flexible joints between components. They prevent leakage or spills of liquids or gases. These ensure proper functioning of vehicles that may otherwise lose power or stop working altogether.

 

6. Benefits of Commercial Vehicle Rental

It is said that, “Amateurs hope, while professionals work”. When it comes to managing just one or even a fleet of commercial vehicles, ensuring that a company’s transportation and logistical needs can be absolutely business critical so why not leave it to the professionals to take care of it? By engaging a commercial vehicle leasing company to be in charge, there is efficient division of labour according to expertise. This is beneficial as it frees up the company from the hassle of owning commercial vehicles. Employees can be fully engaged in the principal business of the company, thereby fully utilising its manpower and maximising resources.

A commercial vehicle rental company also has the advantage of scale and related business contacts over a single owner. For example, the company that chooses to purchase its own commercial vehicle may be constrained by cost. The vehicle rental company is likely to have a larger quantity and variety of vehicles in its inventory. This gives it the ability to provide more flexibility to suit the business requirements of its clients, especially if the needs change from time to time. In this way, the leasing company can be said to be more specialised; customised to a company’s needs and requirements, and able to provide more personalised service.

Other than the daily management of the deployment of commercial vehicles, ownership also entails the burden of repair, maintenance and servicing. Fortunately this is a task that vehicle leasing companies can take on as well. With an expert team of professional automotive technicians it can easily undertake full maintenance servicing, freeing up valuable operational resources that would otherwise be needed to manage the vehicles. It truly is an absolute solution to overcoming the hassle of vehicle ownership.

The Advantages of Cheap Car Rentals With a Reputable Company Versus Unestablished Ones

The brands that are synonymous with short term car rentals have long been household names. When most people think of such short term car rentals in Singapore, names such as Hertz, Avis and Europecar are likely the first that spring to mind. Having been founded in 1918, 1948 and 1949 respectively, these names hold a lot of cache and are amongst the weightiest in the industry. Their business networks span the globe and seem to be at every airport and in every major city, ready to serve clients’ every need.

In Singapore, the car rental market has grown steadily. With car prices consistently ranked the highest in the world, it comes as no surprise that many are opening up to the idea of renting rather than owning. In a study completed in March 2020, the market was projected to grow at a CAGR of 3.71% between 2018 and 2024. After spending 2020-2021 in the doldrums, a sharp 20% rebound is expected in the following year, before levelling off to a more subdued but respectable average of about 7% year-on-year growth up to 2025. Capitalising on the strong demand for both long and short term car leasing, Singapore has seen the rise of many enterprises offering such services. Apart from the traditional car rental companies like the ones mentioned above, resale car dealers, car manufacturers and financing companies have built up a car leasing segment in their business. Even car leasing companies that had long been serving only corporate customers have also begun to open their doors to regular consumers.

As with any well developed business, an established brand comes with many advantages for customers. Want to return a rental car in a different city, enjoy cruising in a luxurious sedan or just like having more options? These are differentiated product solutions that these large brands are able to cater to.

 

Why Enter a Long or Short Term Car Lease With an Established Company

The list of reasons to engage a reputable company when deciding where to rent or lease a vehicle from can be categorised into 3 groups; product offering, convenience and support. Each in itself may not make a compelling enough proposition to a customer but together, the combination of the 3 delivers robust solutions for every need.

In larger, more established companies, the vehicle fleet is often bigger when compared to smaller set ups. Finding the perfect car that meets every requirement without having to compromise would be less of a challenge. Prefer an SUV over a sedan or looking for a sportier ride? With a larger fleet of vehicles, chances are that there’s something in the inventory that fits the bill.

Apart from a wide range of vehicles there could be other services like chauffeured services, flexible tenure options and also different leasing types too.

Personal Contract Hire (PCH) is a medium term rental agreement that typically lasts between 1 to 4 years and the vehicle is returned at the end of the tenure. There is no option of buying the car and the monthly rental amount depends on the length of the contract, the upfront deposit placed with the rental company and the final mileage racked up.

Personal Contract Purchase (PCP) is similar to PCH in all aspects and to a hire purchase (HP) contract which is the way most people buy cars in Singapore. The main differences are that in a PCP, the monthly repayments are lower than that of a HP contract and at the end there is a balloon payment option to take ownership of the vehicle.

Leases can also be open-end or closed-end. This is a way of apportioning the loss when the market value of the car at the end of the lease falls below the residual value as calculated at the start of the contract. This risk can be shouldered by either the lessee or lessor and the monthly repayments are adjusted according to which party bears the brunt of that risk.

Beyond vehicle model selections and different convenient payment options, established car rental companies could have a workshop for repairs and maintenance or they could have a network of workshop partners that clients can choose from. Likewise, there might be breakdown support or towing services and a customer hotline to reach out to in the event of an accident or when mechanical problems arise such as a dead battery that can leave drivers suddenly stranded in an unfamiliar area. There could also be a replacement vehicle available so clients would not be left without transportation while the car is being fixed. These services make it a one-stop-shop that makes the experience of having a vehicle extremely easy and takes out all if not most of the hassles.

However, all these frills come with a price and if one could do without some of the bells and whistles, there are cheaper alternatives.

 

Long or Short Term Car Lease With an Unestablished Company

Whether it is to an individual or a company, costs always form one of the biggest considerations of any decision. If one is willing to deal with some of the occasional inconveniences or able to handle some of the recurring chores like servicing, opting for a cheaper rental vehicle from a smaller company could be a good choice.

Due diligence, especially with companies that are not a recognisable brand, always pays off. In the worst case scenario, the cheap deal from an unestablished rental company may not be properly licensed to operate such a business. This is a more likely scenario these days when service providers can operate solely online or through a phone app without much of a physical presence.

A more likely scenario are hidden costs and inadequate insurance coverage. If there is inadequate insurance coverage, the driver may be liable for any damages that exceed the amount of coverage. Likewise, this lack of transparency can also cost the driver a substantial amount of money if it is not clarified beforehand. Some examples include a surcharge for younger drivers, no unlimited mileage option, extra costs for breakdown services, lack of maintenance logs or simply adding charges for prepaid petrol. The list can be quite extensive and easily overlooked if one does not know what to look out for.

Smaller companies may also have a smaller range of vehicles or vehicles that are older and not in as good a condition either cosmetically or internally. It is important to note that cost savings may seem to be a priority at the expense of comfort initially but it depends on the duration of the rental. A few days with a vehicle that is a compromise could be ignored or even barely noticed but over a longer duration can prove to be a larger bugbear.

That said, the industry for long term as well as short term car rentals have grown to be extremely competitive and even some smaller companies bring a lot of value to the table but one should always be mindful of the potential trade-offs.

Lorry and Truck Size Guide Singapore

When it comes to the logistics of transporting cargo, size does matter. Much more than bigger is better or the more the merrier, the right size for the job is paramount in every instance. After all, there is little utility to be gained in bringing a 24 ft box truck to carry just a few cardboard cartons from place to place. As commercial vehicles, its primary function is to fulfill the business need of transporting items to different destinations. The job could entail moving a variety of items – some perishable or fragile, others much less so. Consequently, commercial vehicles come in a wide variety of designs to serve specific needs or a combination of requirements. There are trucks and lorries that have cargo beds that are opened to the elements, some that are partially covered with a canopy and there are others that are fully enclosed box trucks. With a bewildering array of configurations to choose from, getting acquainted with what is available makes picking one just right for the job a lot easier.


Lorry and Truck Size Guide

The word truck and lorry are both common terms in the haulage industry and are often used interchangeably to refer to Heavy Goods Vehicles (HGVs) and certain models of Light Goods Vehicles (LGVs) like the Toyota Hiace, especially when in a flatbed configuration.

In Singapore, commercial vehicles are grouped into 4 categories:

  • Goods-cum-Passenger Vehicles (GPVs) are the smallest class of commercial vehicles reaching an allowable maximum 5,000kg in maximum laden weight (MLW). As its name suggests, GPVs are permitted to carry both goods and passengers.
  • Light Goods Vehicles (LGVs) are allowed an MLW of up to 3,500kg for carrying goods
  • Heavy Goods Vehicles (HGVs) fall in the range of 3,501 kg to 16,000kg in MLW.
  • Very Heavy Goods Vehicles (VHGVs) are vehicles with MLW of more than 16,000kg.


What is the difference?

Weight is one classification used to describe the dimension of commercial vehicles but the other common method is length. For instance, some standard sizes include the 10ft lorry, 14ft lorry and 24ft truck.

The 2 main factors to consider are budget and shifting when deciding which to buy or rent. Using a truck with a capacity larger than what is needed costs more to buy or rent, uses more fuel and is restricted in terms of parking or access. This might mean that more man power is required to move items to where the vehicle is parked. Shifting within a truck that has too much unused space can also be a problem, especially if the items placed inside are fragile and cannot be secured properly. Often, this means more time needed for stuffing – the process by which goods are loaded – and having to purchase additional packing material or cushioning.

A good way to roughly determine which size to get is from volume calculators provided online. Generally speaking, a 10 ft truck is the minimum needed for a studio apartment. A 2-room apartment might get away with a 14 ft truck but a 5-room home would necessitate the use of a 24 ft truck. Of course, multiple trips can be made instead of a single journey but that all adds up in time and transport costs.

Aside from size, each class of commercial vehicles possess different attributes, perform different functions, attract different taxes and have their own regulations.


Configurations For Your Box Truck Rental

The right tool for the job ensures that the assignment can be completed compently. There are several popular makes and models that dominate this market segment, such as the Toyota Dyna or Hiace, the Nissan NV series, Isuzu and Kia. European brands such as MAN, Scania, Volkswagen and Volvo are also favourite choices.

The most common depiction of a lorry or truck is the one that features a no-frills cargo bed behind the driver’s cabin. It is either completely open, without a canopy, or is semi-covered with scaffolding on both sides that support a metal or tarpaulin roof to keep out the elements. These are used to quickly load goods, equipment or workers and to facilitate the quick unloading of the same. As it is not completely protected from the environment, it is most suitable for transportation over short distances.

For transporting large volumes of building materials like soil, gravel or mineral ores a dump truck is the most appropriate choice as it features a large cargo area similar to a box truck. However, the most important feature are hydraulic arms that can tilt the cargo compartment and quickly empty its contents by pouring it onto the ground or another receptacle.

The box truck is another often seen configuration. As its name suggests, it sports a fully enclosed box as its cargo area. This provides more protection for its contents and also allows for it to be climate controlled, such as a freezer truck or “reefer” to deliver fresh produce. Other handy options include mechanised tailgates that can act as a forklift which helps with loading. There are also non-mechanised versions such as a fold out ramp that allows trolleys into the cargo area, thus eliminating the need to physically lift goods by hand onto the truck.

With a wide array of styles and sizes to choose from, box truck rentals can be tricky to get right but a good place to start is to fully understand the nature of the task at hand. In this way, an optimal balance of budget, capacity and functionality can be achieved when deciding on that big investment into a commercial vehicle. Another sound choice to avoid a wrong investment is to rent or lease a commercial vehicle at a reputable leasing company. In this way, a business owner can try out several different options or do a short term rental while figuring which vehicle is the best choice for the business.

The importance of servicing for your Mercedes

Turning a key in your Mercedes Benz’s ignition causes a number of systems to kick into action. The starter system activates the engine. The engine system turns petrol into mechanical energy to turn the wheels that make your Mercedes go zoom, while the electrical system ensures all components such as lights, computer and on board instruments work flawlessly. What one does not usually expect is that the vehicle remains unresponsive – unable to spring into action upon command, especially if it is a renowned luxury brand such as Mercedes. There are several things the car owner can do to prevent this, with one of the most important being regular car servicing at a Mercedes Singapore service centre or a qualified third-party workshop to keep his ride in good shape. This ensures each of the 8 systems that keep a car running smoothly, remains trouble free.


What is included in Mercedes service packages

This quarter yearly inconvenience staves off greater inconvenience further down the road by extending the service life of the vehicle and its effectiveness by addressing any problems that are detected during the checks carried out during servicing. For a Mercedes, car service on a regular basis is important for 2 key reasons. These are performance vehicles that operate according to precise German standards within a given set of operation parameters, with an emphasis on performance that Mercedes is famous for. Depending on how it is driven, this generally puts greater strain on the mechanical components, especially in intermittent city-type traffic and in tropical conditions that are both hot and humid. Preventative maintenance is therefore a very important aspect of car ownership and regular servicing, integral to proper, uninterrupted function.

Vehicle servicing can be purchased as a package which throws in incentives like savings on a bundle price and freebies or it can be obtained as individual servicing sessions. In both cases, there is a relatively standard set of checks and procedures that are carried out.

Mercedes service packages usually include the following:

Functionality Checks
Wiper

  • Horn
  • Headlamp and signal lights
  • Tyre
  • Belt condition

Replacement and Top-up
Changing engine oil

  • Changing air filter
  • Replacing spark plugs
  • Replacing engine coolant
  • Replacing brake fluid
  • Replacing power-steering fluid


Diagnostic Tests

  • Alternator
  • Battery load test
  • Control Units Functional Check


What Could Go Wrong without Maintenance

It seems everyone knows of that one friend who has an absolutely hand-off approach with his car. It never gets washed and goes years without servicing. In spite of this, it seems to run without a hitch, day after day. However, what goes on underneath the hood could tell a different story and the car could be just a day away from a catastrophic breakdown.

Servicing essentially comprises 2 areas which is replacing consumable items such as fluids and items worn out through usage and the other is to detect abnormalities or problems that are not yet critical but will lead to complications. Examples such as a worn out alternator belt, damaged suspension or cracked CV boot would not immediately cause a car to stall but it would result in serious problems if left unattended for some time. Technicians could also fine tune computer controlled actions such as the firing of the spark plug at the most optimal time, to get the best performance of the vehicle.

Among the standard items that are changed (~10,000km) during every service appointment is engine oil. Along with that at slightly different intervals (~30,000km), engine coolant, transmission fluid, brake fluid and power steering fluid. Without engine oil, the engine would be damaged as there is no lubrication as the piston moves inside the combustion chamber. The constant rubbing would compromise the tight seal around the chamber, resulting in a loss of power and eventually a damaged engine. Lack of coolant in the radiator leads to overheating and causes the car to stall. Insufficient transmission fluid causes rough gear changes, while brakes and power steering would be lost without the appropriate fluids for both, potentially leading to serious accidents. Aside from that, damage caused to these components can also be costly to fix or replace, definitely a lot more expensive than paying for regular maintenance.

Tyres are seldom given significant thought and more often only looked at only when there is a flat but it is one of the most critical components of ongoing care in any car. Pattern of wear gives a good indication on how a car is running and what condition its systems are in. For example, uneven wear patterns could point towards an issue with wheel alignment, tire balancing, or even suspension problems. Keeping tyres inflated to the recommended pressure level, balanced, rotated, and wheels properly aligned, can help avoid the extremely dangerous occurrence of blowouts at high speeds.

Other critical parts of the car are the battery, alternator, brakes, and suspension. During regular servicing, these should be checked for its condition. Any one of these items in a faulty condition would cause the car to break or be dangerous to operate. Finally with many modern Mercedes models, the Electronic Control Units are akin to the brains of the whole machine. Several systems such as the electronic fuel injection (EFI) system, to the in-car entertainment, to the advanced safety features and sensors that enhance safety when driving on the road are controlled by an electronic control unit. A service technician with the appropriate diagnostic tools are able to fine tune the settings to ensure everything is working well.

In summary, there are many advantages to visiting the Mercedes service center that make the expense worthwhile. The risks of not servicing one’s vehicle is the incurrence of extra cost. A well serviced car can consume fuel more efficiently, using less petrol. It also puts less strain on mechanical parts, enabling them to last longer before having to be replaced. Performance can also be compromised on a car that is infrequently serviced as parts that need to be changed due to wear and tear or damage continue to be used. A Mercedes with compromised parts may potentially lead to compromised safety as well, as the behaviour changes and becomes unpredictable. Even when a vehicle is going to be sold off, regular servicing pays dividends. A car in better condition and with proper service records would be able to fetch a better second hand.

A little goes a long way to maintaining the condition of a Mercedes or any car for that matter. Regular servicing may seem like a lot of money to spend at that point in time but it saves much more in the long run.

How Car Rental Companies Have Changed In The Last Decade

First came the bicycles, which brought the roads. Soon after, came the motor car1 which revolutionised all corners of the world, from increasing a person’s mobility both physically and socially to opening up opportunities to changing the way we access services and facilities. As cars became an integral to modern life, it did not take long before rental services became available. Just as the first mass consumer vehicles rolled off the factory lines with Henry Ford’s model T at the dawn of the 20th century, several of the major car rental companies that we have today were also just starting out. Amongst these, are Avis, Sixt and Hertz which all have a history of over a century.

The quintessential car rental company is seen to have a relatively straightforward business model in which a company with a car allows an individual to use the vehicle in return for a payment based on the number of days or distance used. Indeed, this was the business model for many years and it served the market very well. However, the world is constantly changing and nothing stays the same for long. In an industry defined by speed and convenience, businesses have to evolve to maintain its going concern.

 

Short Term Car Rentals in Tune with Lifestyles of New Generation of Clients

Growing mobility, connectivity, a quicker pace of innovation and a desire to have more with less gave rise to the asset-light lifestyle2 where people pay for access to use an item instead of owning it outright. In a globalised world where employees frequently relocate for work or on the other side of the spectrum where the office is online and commuting is unnecessary, owning a car may not be the most financially prudent acquisition. In cases like these, access to usage rather than ownership is the important factor. This mindset has also trickled down to corporations that see it as convenient and also financially sensible. It can concentrate on its core business and no longer has to factor in distractions like maintenance, depreciation, disposal, or asset carrying values. The annual figures show a clear indication that this is a growth sector4. The Singapore car rental market revenue made up US$154 million (S$ 210.46 million) in 2018 and is expected to reach US$205 million by 2022. Projected to the coming years, revenues are expected to grow at a CAGR of 11.73 % from 2021 to 2025, with a growth of user penetration from 6.3% in 2021 to 9.3% in 2025. This has created an opportunity for car rental and leasing companies; one that these businesses have been quick to capitalise on.

 

Car Rental in the Digital Age

Short term car rentals have become a popular alternative to ownership and to continue building on this momentum, car rental companies have had to become much more competitive by offering the following:

 

Greater Options

People love choices. Being able to select extras like GPS, a sun roof, additional insurance or the ability to include home delivery and pick up of the vehicle all add to customer satisfaction as it accommodates their unique circumstances or preferences.

 

Flexibility

Convenience and adaptability is another feature that has come to be expected. This can come in the form of hourly, half day or even overnight rentals instead of the traditional daily terms.

 

Car Sharing

With smartphone apps, car sharing has entered a new realm of possibilities. It has never been easier to facilitate this mode of short term car rentals. Cars are collected and returned6 at several possible predetermined spaces for durations that are measured in blocks of 1 hour or 30 minutes. The entire transaction can even be completed on the phone without any human interaction. In addition to cars, Hertz has also made the model of car rentals available to commercial vehicles like good vans.

 

Going Digital

Smartphone apps have also been used to simplify7 the process of traditional vehicles. With it, customers can skip the queues and reserve their desired vehicle in advance with the options that they want. The apps have also proven beneficial to car rental companies that are now able to build more accurate customer profiles and make tailored offerings.

 

Subscription Based Models

Companies such as BlueSG and WhizzCar6 were amongst the first to operate on a subscription basis. Gradually, more established companies like Hertz and Enterprise caught on8. The advantage to the customer is more competitive pricing because membership all but guarantees that a client is locked into the service. Another benefit is the ability to switch between different makes and models of cars within the fleet of vehicles. A member could be driving an SUV to pick up passengers one day and making use of a goods vehicle the next day to make deliveries.

 

Corporate Customers

Just like individuals, corporate clients have been looking for ways to simplify their operations while still being able to preserve or improve their service levels. An asset light strategy suits businesses well as it allows them to tap into a greater range of resources and expertise. For example, chauffeured passenger vans to shuttle VIPs around can be accessed without the need to hire a company driver or to purchase a company vehicle which might be sitting idle for the large part of the day.

 

Future Proofing

Vehicles are considered long term assets and last for the better part of a decade or more. Buying a current model today exposes the owner to obsolescence at some point, especially as advances in technology accelerate. Short term rentals ensure that the newest or at least newer are available for use. This is especially true for technologies like electric or autonomous vehicles.

As the car rental industry undergoes rapid overhaul, the major players have been quickly adjusting9 to the many threats and opportunities. What this means for potential customers is the expansion of choice never before available, challenging the traditional concept of ownership and making short term rentals a more efficient, resourceful and viable alternative.

Business Equipment Singapore: Leasing Vs Buying

The four factors of production that drive an economy and keep businesses chugging along day after day, year after year are land, labour, entrepreneurship and capital. Of these, capital which comprises factory equipment, tools and other similar manufacturing agents is one of the easiest to obtain and scale according to output. It is the only factor that is man-made. It is the most conspicuous physical representation of any commercial venture. From a hand saw used to make bespoke furniture to computers or the large factory line machines churning out an endless stream of products, these are the long term physical assets that are the backbone of a company.

 

 

Business Equipment Financing

Acquiring the requisite business equipment is clearly essential if it intends to get off the ground and also as a going concern thereafter. These assets are also classified as Plant, Property & Equipment on a company’s balance sheet and make up a portion of a company’s net worth. It is vital to quickly and economically obtain, upgrade or replace the equipment needed to sustain business operations but purchasing equipment outright can substantially strain a company’s cash flow. Business equipment financing can be a good solution to keep a business functioning optimally or meet increasing customer demand.

 

 

Paying in cash

Paying for equipment in full with cash has both advantages and disadvantages. Capital allowances are permitted in investments on fixed assets. It reduces the taxable income at the end of an assessment year, reducing the tax burden. This can be claimed over 2 – 3 years or over the useful life of the asset as prescribed by the authorities for a given asset class. As the owner of the asset, one can also exercise the decision to modify, sell or dispose of the asset. This is usually not possible in a leasing arrangement where terms of the contract have to be abided by. This can be beneficial as one can then service, improve or customise the equipment without seeking the approval of the lessor who is the legal owner of the property.

If the business owner has full ownership of the machinery, it can be seen as a more liquid asset where it can be sold or further rented out to generate cash flow to fund other more essential parts of the business.

However, this may be a prudent avenue if the return on investment exceeds the loan interest rates. In such a case, taking the loan generates more returns than it costs and can be considered a smart use of leverage.

 

 

Taking a business loan

Approaching a bank for a loan is taking a step towards maximising the benefits of leverage. In such a strategy, a business owner buys equipment on credit by obtaining a sum of money from a bank and repaying over the life of the loan with interest. Like making capital investments with one’s or a company’s funds, the advantages of full ownership, as mentioned above, can be enjoyed.

These loans, however, may come with conditions of their own, especially if the item itself forms the collateral. In this case, maintenance, sale or modifications may be restricted. The item could also be repossessed and sold off if the borrower falls behind on loan repayments.

 

 

Government grants

Aiming to spur innovation, government grants or start-up schemes are also widely available to bring financial aid to the aspiring business owner. Several government agencies such as Enterprise Singapore, Ministry of Trade and Investment amongst others have made funding available to small and medium enterprises (SMEs) such as the often mentioned PSG (Productivity Solutions Grant) and EDG (Enterprise Development Grant). These defray the costs of capital investments but have to meet the requirements set forth, such as increasing employee headcount or achieving a certain level of revenue.  The upside is that these are the “cheapest” form of financing but could be restricted by the need to meet predefined milestones or losing some autonomy in business decisions.

 

 

Venture Capital/ Angel Investors

Both are similar in the sense that funds come from private sources. The difference is that venture capital pools money from multiple sources such as investment companies, a diverse set of individuals, pension funds or even other corporations while angel investors are described as investors using their own money.

These private investors are primarily concerned with a return on their investment and may set conditions and benchmarks to attain within a timeframe. Additionally, it is common for a percentage of equity in the company as part of the remuneration. This essentially gives away part ownership in one’s company.

 

 

Crowdfunding

Capitalising on the connectivity of the internet, crowdfunding brings together a disparate group of people to fund a project. This works best if the company is started to build a product that it can deliver to its backers. The upside is that there is no cost to the company, except in marketing the project to build interest and there is no obligation to release the product at all – the backers bear a large share of the risk. The transaction is facilitated by online platforms such as Kickstarter, GoFundme and Indigogo.

 

 

Leasing

Returning to more conventional territory, capital leases are one of the most popular methods of funding capital purchases.

With the availability of customisation and choices to choose from with regard to repayment, front load deposit or open-end payments, those looking for a lease are spoilt for choice.

In addition to traditional financial institutions that most borrowers are used to, there are also alternative lenders that can provide the right leasing facility. These equipment leases can also be catered for a transfer in ownership at the end of the contract period or the items can be returned to the lessor. Those taking up such arrangements can find the benefit of enjoying the long term use of vital equipment while freeing up liquidity or providing better control of cash flow management.

 

 

Equipment funding for small business

Small businesses and start ups face many challenges in establishing themselves in the industry. Choosing the right method to finance that all important investment in crucial equipment like factory hardware or even commercial vehicles to bring the goods to market is a long-term commitment that would make an impact on every business owner.