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Circular Economy

What are illustrative case studies?

Many companies have been implementing circular business models and are developing – in cooperation with financial institutions – new financing structures.


Bundles is a start-up that sells washing cycles instead of washing machines (pay-per-use, product-as-a-service). Bundles is responsible for the installation, maintenance and repair of the machine, but also replacement if the machine becomes outdated or broken.

Bundles shapes the relationship with its customers as an operating lease, which means that Bundles retains ownership of the washing machine. An investment of around € 1,000 is needed for a new machine for every new customer, until the asset base is large enough to circulate machines that are paid off completely. This upfront investment has a payback period of five to six years and therefore leads inevitably to a funding need.

There are multiple challenges arising in this case. Firstly, the washing machines need to be financed but have a longer payback period than if they were sold, which puts pressure on cash flows. Secondly, the company’s balance sheet continues to grow because it retains ownership of the assets, which creates a capital demand to finance long-term ownership. Thirdly, there is no end-of-life company yet in place to remanufacture or refurbish the used washing machines, which makes it very difficult to incorporate residual value into the lease construction.

In collaboration with Rabobank, Bouwinvest and Miele, Bundles is exploring ways to structure long-term funding.

Working Group FinanCE. 2016, p50.

Additional best practices can be found in this publication in chapter 3.1 ‘Cases’.

BMA Ergonomics

BMA Ergonomics (“BMA”) manufactures office chairs using ergonomic principles. From the start of the company chairs have been designed for easy disassembly. Initiated as a means to facilitate cleaning and maintenance, nowadays BMA profits from the efficient use of resources and the circularity of this business model.

BMA has translated this into a model offering chairs for use (rental) for a ten-year period. Customers pay a fixed fee for the first five years and a reduced fee of nearly 50% for years six through ten. At the start of the contract the customer pays a deposit per chair, which is refunded when the chairs are returned.

ING developed a model analyzing the financials of BMA when the company started to implement the circular model. There are two major financial implications to be highlighted.

  1. Gross margin: The shift from selling to renting has a big impact on the gross margin. In the linear model the margin is steady, while in the circular model the gross margin starts low and recuperates as time goes by. At first, the production costs are not covered by the first rental payment. But eventually, the gross margin of the circular business model is higher than the linear one. This is to be expected as keeping control over the chairs and having them returned, allows BMA to refurbish and sell them again, decreasing the production costs.
  2. Working capital: Pre-financing the production and purchase of chairs in the circular model increases working capital demand. The deposits could compensate this. However, as these deposits have to be paid back to customers when returning chairs, the questions arises if this money can be used by BMA to finance its working capital, or if this money is reserved for customers and therefore ‘trapped’ and not at BMA’s disposal.

ING Economics Department, 2015, p47.