The latest IT equipment may seem a must-have for leading edge companies, but how should you finance it? And an even bigger questions looms: what do you do with it when the next generation of equipment comes out?
To solve those challenges, Sasfin has joined a unique partnership behind Innovent Rental and Asset Management Solutions. It is backed by Sasfin and Innovent Holdings, which - after the finalisation of a BEE deal - will own 3% of the Sasfin Group.
"We focus on residual-based asset finance - big-ticket asset finance for the corporate world," says Innovent Rental director D J Kumbula. Sasfin holds a 33% stake of the business and finances the book of assets, which are rented to clients. Deals average between R2m and R5m. "Some of the largest SA companies such as PwC and Discovery Health now rent from Innovent. We are the fastest growing moveable assets rental company in SA," says Kumbula.
The Innovent business model focuses on the residual value of the equipment once a rental agreement has run its course with a client. It is in wringing value out of the depreciated equipment that it is able to make its money.
"We make our return and recoup our residual investment when the goods come back. We refurbish and re-market them," says Kumbula.
That model allows Innovent to offer a market-beating deal to clients - Innovent's financial model can be based on effective rates under prime.
But Innovent is also able to take on what can be a big hassle for clients in a typical lease situation: what to do with the equipment at the end. It takes the goods off the client's hands and markets it through a large distribution network that it carefully maintains.
"You can't do this without knowing where the goods are going to go to in three years' time," says Shahied Rylands, a director of Innovent Holdings and of Sasfin's group board.
"You are saying I am taking a hassle factor from your life. You don't have to have staff trying to collect assets from people, trying to find a market to dispose of them, getting brokers to come and bid for old equipment. I'm taking the whole hassle out of the company and paying you to do it," says Kumbula.
The model also gives the client flexibility in another way - to manage their IT upgrades. Rental agreements allow for planned replacement of redundant equipment.