Renting Furniture: A Viable Solution in Today’s Economy
Kay Kendall
Until recently, decision-makers never considered the long-term financial impact that purchasing furniture could have on their bottom line. Companies that normally experience very little change now have the added worry of disposing of furniture because of an unexpected corporate merger, relocation, or downsize. And because of the impact technology is having on most industries, change is happening to everyone. And everyone has to be able to change quickly. Because of this, even companies that previously NEVER RENTED are renting office furniture for special projects, temporary office space, satellite offices, and swing space. Renting also helps companies make changes ala moment’s notice and conserve their capital to purchase other things like business equipment or advertising.
These are a few of the many reasons why renting furniture is a viable solution, especially during the recent economic indicators. Whether you plan to purchase or rent your furniture, here are some basic questions to think about before making your decision.
* Will additional staff be hired? Permanently or temporarily?
* How will the investment of furniture impact the company’s line of credit?
* How long will the furniture fit the needs of your current business model?
* Is growth anticipated? If so, how soon?
* How will furniture that you purchase today be stored or disposed of later if it is not needed?
The Furniture Purchase Option
When a business decides to purchase, it can spend a considerable amount of capital to suit even a few offices. If financing, there is a down payment as well as finance charges. Furthermore, financing can limit the company’s line of credit.
When purchasing, the expenditure can be written off using the current method of depreciation, but the full tax benefits are usually not recaptured for five to seven years. All things being equal, this may not affect the company, but if the company needs to make changes before recapturing the full tax benefits, they can actually lose money on their investment.
The normal waiting period for purchasing furniture can be 12 weeks. After the furniture is delivered and set up, there is little room for change. In the event of downsizing, expansion, moving, or changes in decor, the company will have to buy more furniture (assuming the same products are available), sell what they have (for pennies on the dollar), or spend additional money storing it, Also, there are usually the added costs for repairs.
The Rental Furniture Option
Renting furniture requires considerably less initial capital outlay than purchasing, Only the first month’s payment is required with no down payment or finance charges. There are also tax advantages. Each monthly payment is fully deductible as an operating expense rather than a capital investment. Thus, each monthly payment is a fully deductible monthly expenditure instead of a depreciated expense–which purchase options normally offer. The deduction is merely the exact cost of the monthly lease amount There is also no sales tax involved.
If the company decides to move, the furniture rental company will move their items at a cost that is competitive with most moving companies. Also, if the business arrangements don’t work out, there is no obligation past the contract term–which is normally only a few months. One call to the rental company and all items will be picked up.
Additionally, rental offers a damage protection to cover normal wear and tear to the furniture during the rental term. The company does not have to send the furniture out for repairs and lose valuable workspace. Instead, the leasing company exchanges whatever items are damaged in just a few days.
The rental industry also provides lease-to-own programs. The monthly payments are 100% applied to the purchase option. The company can pay the lease term off in advance with no penalty. The company can also return all items and begin a new lease. Furthermore, the rental agreement is not a loan. It conserves the company’s credit line!
Whether purchasing or renting furniture; taking a few moments to consider the company’s future plans can help make the most cost-efficient decision now and save the company more in the future
Kay Kendall coordinates Brook Furniture Rental’s national commercial marketing program.
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