Nigeria is ideally positioned as a gateway to the African market, giving equipment leasing businesses the potential to expand their services to other African countries. Because of Nigeria’s massive population and the presence of various industries, there is a large market for equipment leasing.
Overall, the equipment leasing market in Nigeria and Africa offers lucrative potential for investors and entrepreneurs eager to capitalize on the expanding demand for equipment in a variety of industries. Let’s take a look at how you can handle this situation successfully.
What is An Equipment?
Any tangible asset utilized to complete a certain task or operation is referred to as equipment. Equipment can refer to many types of machinery or equipment used in industries such as construction, agriculture, mining, and transportation, among others, in the context of equipment leasing businesses in Nigeria and Africa.
What is the Equipment Leasing Business in Nigeria?
Equipment leasing is a type of business in which a corporation rents out equipment or machinery to other companies or individuals for a set length of time. This method is gaining traction in Nigeria and Africa as a result of its multiple advantages, including cost savings, reduced risk, and more flexibility.
The equipment leasing business entails the purchase, maintenance, and leasing of equipment to multiple clients. This technique is known scientifically as equipment renting or equipment hire. Construction equipment, office equipment, agricultural equipment, and medical equipment, among other things, could be included. This industry necessitates substantial research to determine the sorts of equipment in demand, the target market, and the price strategy.
Because leased equipment is in high demand in Nigeria and Africa, the production yield after farming might be large. The equipment leasing industry could also have a positive economic impact by creating jobs, lowering the need for capital-intensive projects, and enhancing access to key equipment in a variety of industries.
Overall, the equipment leasing industry provides several chances for Nigerian and African entrepreneurs. However, thorough study, planning, and execution are essential for success in this industry.
Benefits of the Equipment Leasing Business in Nigeria
Some of the advantages of the equipment leasing company include:
- Increased access to equipment: Equipment leasing allows firms to gain access to a variety of equipment without having to own it completely.
- Cost savings: Businesses that lease equipment can save money because they do not have to pay the entire cost of purchasing the equipment.
- Flexibility: By leasing equipment, firms gain the ability to modify their equipment as needed.
- Tax benefits: Lease payments are often considered a tax-deductible expense, thus firms can benefit from equipment leasing.
- Funds conservation: Leasing equipment allows organizations to save funds for other vital needs such as inventory or marketing.
- Fixed payments: Because equipment leasing payments are fixed, firms can budget and plan for their spending more easily.
- Reduced maintenance costs: Leasing companies frequently manage equipment maintenance, relieving enterprises of the responsibility.
- Reduced risk of equipment obsolescence: By leasing equipment, organizations can upgrade to newer models without paying the costs associated with disposing of obsolete equipment.
Things To Keep in Mind Before You Start an Equipment/Property Leasing Business
Like every other business attempt I’ve discussed on Small Starter, The hiring and leasing industry has its own set of critical success variables.
In this section, I’ll go over three important points to keep in mind. Before you even consider entering this enticing sector,
#1. It is a capital-intensive industry.
Everyone would undoubtedly own a warehouse, construction equipment, or tractor if they could afford it.
The very high cost of rental equipment is one of the advantages you will have in your business. This is especially why clients would flock to you to lease or hire.
#2. The essence of this business is your equipment. Take excellent care of them.
One of the best aspects of the hiring/leasing industry is that your equipment is always with a customer. It’s still generating revenue for you.
And this is why you must always ensure that your equipment/property is in good operating order. As the primary owner of the equipment, it is your responsibility to ensure that it is managed, maintained, and operated in accordance with the recommended standards. It’s critical that you establish a balance between upkeep and utilization.
#3. The terms and conditions of hiring your equipment must always be explicit.
You must always specify explicit conditions and terms for the use of your valuable asset when working with clients that rent your equipment/property. If you don’t, you’ll be encouraging others to cross the boundary, and they may be careless with your equipment, causing it to be damaged.
How to Start the Equipment Leasing Business in Nigeria
When you’re certain that this equipment leasing business is what you need to pursue, let’s look at how you can get started:
#1. Determine the type of equipment leasing business you wish to establish.
Construction equipment leasing, generator rentals, farm equipment leasing, computer equipment leasing, and many other forms of equipment leasing enterprises exist.
To decide which equipment leasing firm to start, conduct extensive market research to first understand the market, price structure, and other factors. With this knowledge, you can decide which equipment leasing business is appropriate for you to start.
According to my experience, generator rentals for events and construction equipment rentals are two of the most profitable equipment rental businesses to start in Nigeria because leasing a 100 kVA generator for one day can cost up to 130,000 Naira and leasing an excavator can cost the same range, with cranes costing over a million Naira.
You may also hire out mobile air conditioners, and he is in the generator rental business for events and general backup power.
If you lack the funds to acquire the equipment, you can begin as a broker and earn a commission on each successful rental that is paid for.
#2. Create a business plan.
When beginning a leasing company, a comprehensive business plan is essential. Especially if you intend to borrow money. If you can present your bank with a well-researched and appealing business plan.
They are more likely to assist your new leasing firm financially. A typical business plan will begin with a company profile and executive summary, which will list your company’s structures and key principles. What things you intend to lease should be clearly stated in your company plan.
And a market evaluation summary indicating where your firm will be located in the market. It should also include an implementation summary as well as a plan explaining how your company will operate. Also included is a management overview outlining how it will be run.
You can find valuable examples of leasing company business plans/strategies online. It is critical to have well-researched and well-defined financial strategies that are both doable and realistic.
#3. Examine the costs.
A leasing firm may necessitate a substantial amount of start-up cash. It is essentially a business that buys items and then leases them to other businesses.
So, before you can even start leasing items out, you’ll need to build up a good supply of equipment. Before proceeding, consider the prospective costs and make some rough estimations.
All of this research into the leasing sector. When you decide to design your official business strategy, you will use the possible revenues and costs.
#4. Instead of buying more, buy wiser.
Knowing your clientele and what they are looking for allows you to make more informed decisions about the equipment you purchase.
At all costs, avoid idle inventory. It simply eats up money and space that you could be using to grow your business!
Don’t overpay on equipment at first. Based on your market study, purchase your minimal viable supply. You get started right away, and then you buy more of the lucrative and popular equipment.
#5. Purchase the necessary equipment
The following step is to purchase the equipment you plan to lease. You must purchase the most in-demand equipment in order to make the best use of your money.
An excavator is the most critical piece of construction equipment to purchase. It is the most frequently leased, and you would be paid between 120,000 and 180,000 Naira a day for it. Over time, you can purchase a low bed for transporting equipment as well as rentals, a swamp buggy, a bull dozer, a crane, and other items.
A 100KVA and a 200KVA generator are required for generator rentals. Some clients may want a 300KVA, 400KVA, or 500KVA generator, which may result in much larger payments. However, the 100KVA and 200KVA generators are the two most critical ones to purchase.
For other equipment, you should first purchase the most in-demand items in their class before moving on to others.
#6. Organize your paperwork
Not the most exciting subject, but one that must be addressed. The work you need to undertake is entirely dependent on your location.
Aside from the procedures involved in beginning any type of business, a rental firm has additional insurance liabilities. Non-employees using your equipment is critical to the success of your company.
#7. Form collaborations
Begin by asking yourself, ‘What other services or goods are my consumers searching for?’ If you open a bike rental shop, your customers may additionally require:
- Where to stay – hotels, bed and breakfasts, etc.
- Museums, nature parks, and other places to visit
- Restaurants, amusement parks, and shopping malls are all options for entertainment.
#8. Take good care of your equipment
Your company relies on its equipment – no equipment, no rentals! That is why it is critical that you take excellent care of your equipment inventory:
Regular maintenance entails detecting and correcting any problems before your customers do! Prompt and comprehensive repairs – resolve any concerns quickly and properly. So they don’t cause any more problems in the future.
Cosmetic repairs – your equipment should not merely work like new. It should look brand new as well! Make a good first impression on (possible) clients. Take excellent care of your equipment, and it will take care of you.
#9. Make a watertight agreement.
Do you believe your clients love arguing with you? And do you enjoy arguing with them? The precise answer to the first question is ‘no’. Also, ‘no’ should be your definitive answer to the second question.
However, what can you do to avoid arguments? Make certain that you and your clients are constantly on the same page. What is considered acceptable wear and tear on rental equipment?
When and where does the rental period begin and end? What should the customer do if something goes wrong? What are the consequences of loss, theft, damage, late returns, and so on? To avoid controversy and confusion later on, clearly consider the answers to these questions upfront.
#10. Strengthen your company’s physical infrastructure.
Once you’ve completed all of the necessary preliminary procedures, you can begin to define your business and make it a reality.
To meet the needs of its consumers, a leasing company will require a solid physical infrastructure.
Depending on the nature of your company. You’ll need a place to store your rental equipment as well as office space to run the firm.
You will also require vehicles and personnel to supply the rental materials. Refer to your business plan’s implementation approach.
#11. Register your company.
It is critical that you ensure that the company is properly registered. To operate legally, your organization must be registered in the state in which it operates.
Fortunately, the process of registering a business is extremely straightforward. Business license application forms are usually available at city hall.
How Do You Make Money From Equipment Leasing?
Companies that lease equipment make money by collecting fees for their services. These fees may include application fees, closing costs, and loan interest. Furthermore, certain leasing businesses may levy additional costs for late payments or equipment maintenance.
What are the Problems with Equipment Leasing in Nigeria?
According to research, the issues are funding, high importation costs of equipment, payment default due to exhaustion, fraudulent activity, and bad credit bureau.
What is the Equipment Leasing Act in Nigeria?
The Equipment Leasing Act includes 45 sessions and is primarily intended to promote the leasing business in Nigeria by, among other things, fostering clarity, predictability, and sanity in leasing practice and ensuring protective mechanisms for both the lessor and lessee.
What is One Disadvantage of Leasing Equipment?
You have no equity in the equipment because you do not own it. This implies you won’t be able to recoup your investment by selling the equipment after you’re finished with it. When you lease, you often pay more in the long run than if you paid upfront.
How Many Years Is a Lease in Nigeria?
The land will be held in trust for all Nigerians and administered for their use and benefit. As a result, the title issued by the Governor to a purchaser of a plot of property is a right of occupancy (a lease), usually for 99 years and renewable.
To summarize
Because it offers a wide range of equipment leasing services to people, organizations, and government agencies, the Equipment Leasing Business is a profitable venture in Nigeria and Africa. The business is expanding as a result of rising demand for equipment leasing services, the expansion of the construction, agriculture, and transportation industries, and the government’s commitment to infrastructure development.
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