A decade or so ago, if you were building a home, mowing the lawn or doing another domestic duty, you would have to pay for pricey construction equipment. Today however, you can rent all the industrial items you desire, from rakes and hoses to excavators, bulldozers and skid-steer loaders – meaning you pay only for the time you need, cutting costs for the humble individual DIY-er, and even the largest global manufacturing firms.
What’s more, more of us are willing to lend and share our equipment. The growth of this “sharing economy” trend is illustrated by the growth in revenue made by those renting and leasing commercial or industrial equipment in the US: according to statistics website Statista, in 2005 renters made $38.8 million. By 2016, that figure had surged to $74.6 million.
Machinery is vital to many industries such as agriculture, but it is also highly expensive. And many agri-businesses have come to rely upon the latest, cutting-edge tech to drive efficiency in choppy market conditions. Buying the tools outright and investing in the technology is hard when budgets are under pressure and profits are a harvest away — and the tools are often only used for a few weeks of the year anyway.
The sharing economy is a viable solution for these companies, propelled to popularity by platforms such as Uber and Airbnb, who enable goods and services to be shared by people and organizations.
The basic idea is that people, from farmers to construction firm operators, can rent out their tractors and cranes which they are not using to others who need the equipment during relevant seasons.
MachineryLink Sharing, an online platform, has already attempted to bring this model to the US construction market, with some success. The benefits are obvious: leasing enables you to upgrade to the latest equipment without buying it outright, and to scale up or downsize your fleet of machinery when – or if – necessary.
While the sharing economy has provided a solution to a pressing need in many industrial industries, and has provided an alternative to the much-maligned conventional purchasing models, the sharing economy presents problems, too. Is it really viable to rent out expensive and large machinery to complete strangers? If the equipment is returned in poor condition – or not at all – the owner will be out of pocket and under even more pressure than they were before the rise of the sharing economy.
A smart leasing agreement with concrete terms and assurances can resolve these concerns. Although better known as the escrow service for real estate deposits, RxEal has applied its tried-and-test system to the renting and leasing of industrial equipment – with much success.
The platform solves many of the problems associated with renting out construction equipment by increasing transparency, boosting operational efficiency, and reducing legal liability and administrative and bookkeeping costs. In addition, RxEal offers a mechanism to claim on losses.
Here’s how it works. For one, RxEal enables the tracking of rented items and of deposits taken on the equipment rented out. This solves the problem of commingling of funds — which presents a legal risk — when you mix a deposit for a construction machine in your current or business checking account. That’s actually illegal to do in many US states because it can be impossible to accurately track the deposit, and the money could be lost. With RxEal, a deposit is stored in a smart contract – separate from both the owner and the renter – during the rental period, or until both parties agree to end the contract.
Moreover, RxEal prevents accidental spending of a deposit. If an owner gets into financial hardship, for example, they may be tempted to use the deposit to get out of trouble. Or RxEal can prevent a common situation in which an owner accidentally spends the deposit that is stored in a business checking account, without realizing their mistake. Ultimately, this system increases trust because the equipment-owner has no ability to access the funds, and no legal right to do so, so RxEal can enforce the contract if need be.
In addition, interest may be accrued on a deposit, which, by law in some countries, must be returned to the person who actually owns the deposit — the one renting the construction machine. RxEal solves this problem by storing the money in Ethereum, or another digital token called Dai. The deposit amount is recorded in number of tokens. Exactly the same number of tokens are returned to the renter, so any interest is automatically included in the payment.
In a time of diminishing profits, flexibility of budget and security is increasingly important for anyone working in the construction or industrial sectors. Peace of mind, and reduced expenditure, can result in an increase in income via mitigating costs. Overall, that’s good for everyone involved: limiting waste, increasing freedom and making more money from machines that are barely used year-round.