ORIX Leasing Singapore Limited
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Financing Examples

The examples below illustrate how different financial solutions can be applied.*

Example 1: Hire Purchase Scenario

Example 2: Receivables Financing Scenario

Example 3: Merchant Cash Advance Scenario

* Disclaimer: These examples are entirely fictitious and purely for illustration purposes only. The figures and interest rates are not representative and additional terms and conditions may also apply. Each financing application is also subject to a credit assessment and evaluation. ORIX Leasing Singapore Limited and its employees make no representation or warranty, whether expressed or implied, and accept no responsibility for the completeness or accuracy of the computation. Interest rates depend on the loan amount and period and are subject to ORIX Leasing Singapore Limited's management's approval.

 

 

Example 1: Hire Purchase Scenario

Company A is a construction company that does work for commercial building developments. Their existing mobile crane is reaching the end of its useful life and they are looking at acquiring a new vehicle.

Hire Purchase

They have been looking at the new hydraulic mobile crane with a 45 metre main boom. The purchase price of the vehicle is $800,000 and they are considering to acquire this on a Hire Purchase basis over a period of 3 years.

Company A has been provided the following terms by the Leasing Company:

Interest Rate : 4.6% per annum effective
Tenure of Hire Purchase : 3 years
Frequency of Repayments : Monthly in advance

Based on these terms, Company A has a few options to consider.

Option 1: Put up a 10% downpayment of $80,000 and make monthly repayments of $21,368.07 for the mobile crane under the Hire Purchase arrangement.

Option 2: Put up a 20% downpayment of $160,000 and make monthly repayments of $18,993.84 for the mobile crane under the Hire Purchase arrangement.

After making full payments at the end of the Hire Purchase Agreement, Company A will have full title to the mobile crane.

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Example 2: Receivables Financing Scenario

Company B is an architectural firm that specialises in commercial projects. They have several reputable clients and multiple projects ongoing at the same time.

Receivables Financing

It has recently been approached by an engineering company to partner for a joint bid on an overseas project. To be part of the bidding consortium, Company B would have to put up part of the security deposit for the bid, amounting to $400,000. It also has to finance its own bidding costs over a 6 month period which is estimated at $500,000.

Company B is keen to exploit this opportunity. However, this will place a strain on its working capital as its other projects have just started and payments are not expected to be in for another 4 months.

It has approached a Leasing Company for financing and is willing to pledge its expected receivables as collateral for additional immediate working capital.

The Leasing Company has offered Company B the following terms:

Interest Rate : 5.0% per annum
Loan Tenure : Up to 18 months

Based on these terms, Company B can consider several options.

Option 1: Take up financing of $900,000 from the Leasing Company and repay this only at the end of 12 months. This would require Company B to make one-time payment of $945,000 at the end of the loan tenure.

Option 2: Take up financing of $600,000 from the Leasing Company to cover the security deposit and initial bidding costs and to start monthly repayments from month 7 onwards after they start receiving payments from their existing contracts. Company B would need to make 12 monthly repayments of $52,643.27 from month 7 onwards. There is no payment for the 1st 6 months.

Under both options, Company B would be able to generate immediate working capital to take advantage of the opportunity to participate in the overseas project. Both options would also require Company B to legally assign the receivables from their existing contracts to the Leasing Company as collateral for the financing.

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Example 3: Merchant Cash Advance Scenario

Restaurant C is located in the Central Business District (CBD) and has been operating for the last five years with a steady stream of customers from the surrounding offices.

Receivables Financing

Unfortunately, the restaurant’s décor is starting to show wear-and-tear and is overdue for an update. Restaurant C’s cash flow is also currently stretched as it recently opened a second restaurant branch.

Faced with this situation, the owners of Restaurant C approached ORIX Leasing Singapore Limited (ORIX) for financing options. ORIX suggested that Restaurant C consider a Merchant Cash Advance (MCA) to enable it to proceed with the renovations.

Upon ORIX’s assessment of their MCA application, Restaurant C was informed that ORIX would be prepared to “buy” a portion of their future credit card receipts at a discounted price. Restaurant C would receive cash upfront in exchange for a percentage of their future credit card receipts.

This meant that a fixed percentage of the restaurant’s daily credit card takings would be paid to ORIX. When business was good, a higher amount would be paid to ORIX and correspondingly, when business was slower, the amount to be paid would also reduce.

Restaurant C’s owners found that the MCA aligned their payments to ORIX with the cash flow of their business. They decided to take up the MCA as they found it be a convenient and hassle-free way to finance their renovations. As a result, were able to proceed with the renovations with the cash received upfront.

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