Equipment Lease & Finance ARTICLES
www.leasingsecrets.com
a division of Equipment Funding Resources
a division of Equipment Funding Resources
What an Independent Leasing Company
Should Provide to a Company or Business
Are you a business owner or decision-maker? Are
you are considering doing business with an
independent leasing company? Do you, or your
company, offer equipment leasing and financing as
a product or service?
Based on thirty years experience in this industry,
these are the things a competent, professional
equipment leasing/financing company should be
able to provide.
An evaluation of a company's credit worthiness
This is accomplished by the collection of the
proper credit information. This includes, but is not
limited to, a signed credit application, personal and
company tax returns and/or financial statements.
Based upon this information, a determination of the
amount and cost of a credit approved (rejected)
equipment lease can be provided. For smaller
dollar transactions (under $75,000), this process
should take place within 2-3 business days of
submission of the application. This is assuming the
banking and trade information provided is accurate
and readily able to be confirmed. Transactions in
excess of $100,000 require more information and
generally have a longer processing time. However,
it is reasonable to assume that a decision should be
rendered within 5-7 working days.
A timely rate expectation for the client
Pricing is now, more than ever, tied to a credit
scoring system used by lenders for small and large
transactions alike. It encompasses various
benchmarks such as personal credit scores, D&B
Paydex ratings and how a business or company has
handled past, similar debt.
Regardless of that, the independent leasing
company should be able to process a particular
transaction, and begin to set rate expectations for
their client. This can occur as early as when the
personal credit bureaus and D&B report are
reviewed (within one day), to as late as the day a
final decision is communicated from the lender on
larger transactions (5-7 days).
Decisions processed without advance fees
It is something a competent, professional
organization should be able to do in a timely way,
without any significant time or money commitment
on the part of the customer. In other words, no
advance fees or deposits should be required to get
to a decision point on the approval. On larger
transactions over $250K some lenders, usually
banks and larger institutions, may require a “good
faith deposit” and a signed proposal or commitment
letter to process a package. In all cases, this
deposit should be refundable or applied to actual
payments on the transaction in the event of an
approval.
Should Provide to a Company or Business
Are you a business owner or decision-maker? Are
you are considering doing business with an
independent leasing company? Do you, or your
company, offer equipment leasing and financing as
a product or service?
Based on thirty years experience in this industry,
these are the things a competent, professional
equipment leasing/financing company should be
able to provide.
An evaluation of a company's credit worthiness
This is accomplished by the collection of the
proper credit information. This includes, but is not
limited to, a signed credit application, personal and
company tax returns and/or financial statements.
Based upon this information, a determination of the
amount and cost of a credit approved (rejected)
equipment lease can be provided. For smaller
dollar transactions (under $75,000), this process
should take place within 2-3 business days of
submission of the application. This is assuming the
banking and trade information provided is accurate
and readily able to be confirmed. Transactions in
excess of $100,000 require more information and
generally have a longer processing time. However,
it is reasonable to assume that a decision should be
rendered within 5-7 working days.
A timely rate expectation for the client
Pricing is now, more than ever, tied to a credit
scoring system used by lenders for small and large
transactions alike. It encompasses various
benchmarks such as personal credit scores, D&B
Paydex ratings and how a business or company has
handled past, similar debt.
Regardless of that, the independent leasing
company should be able to process a particular
transaction, and begin to set rate expectations for
their client. This can occur as early as when the
personal credit bureaus and D&B report are
reviewed (within one day), to as late as the day a
final decision is communicated from the lender on
larger transactions (5-7 days).
Decisions processed without advance fees
It is something a competent, professional
organization should be able to do in a timely way,
without any significant time or money commitment
on the part of the customer. In other words, no
advance fees or deposits should be required to get
to a decision point on the approval. On larger
transactions over $250K some lenders, usually
banks and larger institutions, may require a “good
faith deposit” and a signed proposal or commitment
letter to process a package. In all cases, this
deposit should be refundable or applied to actual
payments on the transaction in the event of an
approval.
The Different Types of Transactions an
Independent Leasing Company Should be
Able to Handle.
Frequently, companies requiring equipment
financing utilize independents, whose banks, or
other traditional sources of debt financing, will not
consider for various reasons. The reasons range
from a changing or deteriorating credit profile, to
non-typical or even “exotic” equipment types.
Certain types of “soft collateral” are not popular
with most traditional bank-type lenders. Computer
hardware and particularly software falls into this
category. In fact, many institutional lenders view
software financing as a form of “unsecured”
financing. This is because in a worst case
scenario, the software is of no value in the event of
default of the lease or loan.
A qualified and established lease broker should be
able to handle most “soft collateral” leasing
requirements for an established business with a
reasonable credit profile. However, expect their
underwriter/lenders to also have limits on the
amount of funding they will approve, related
mostly to an acceptable percentage of software vs.
hardware purchased.
If credit is strong enough, the lenders may also
approve a percentage of installation, training and
services as part of the overall hardware/software
purchase.
Independent Leasing Company Should be
Able to Handle.
Frequently, companies requiring equipment
financing utilize independents, whose banks, or
other traditional sources of debt financing, will not
consider for various reasons. The reasons range
from a changing or deteriorating credit profile, to
non-typical or even “exotic” equipment types.
Certain types of “soft collateral” are not popular
with most traditional bank-type lenders. Computer
hardware and particularly software falls into this
category. In fact, many institutional lenders view
software financing as a form of “unsecured”
financing. This is because in a worst case
scenario, the software is of no value in the event of
default of the lease or loan.
A qualified and established lease broker should be
able to handle most “soft collateral” leasing
requirements for an established business with a
reasonable credit profile. However, expect their
underwriter/lenders to also have limits on the
amount of funding they will approve, related
mostly to an acceptable percentage of software vs.
hardware purchased.
If credit is strong enough, the lenders may also
approve a percentage of installation, training and
services as part of the overall hardware/software
purchase.
| Articles catering to the interest and needs of company decision-makers, business owners, equipment vendors, finance and other professionals. |
The Pros and Cons of “Computer Vendor
Leasing Programs”
The opposite end of the spectrum is “hard
collateral” lending. What types of transactions
should an equipment leasing independent be able
to handle on this type of equipment and/or the
refinancing of existing leases and loans?
Leasing of computer hardware and software came
into vogue in the 1970’s. Spurred by rapid
changes in technology and consistently rising
equipment prices, IBM and subsequent technology
manufacturers cleverly found a way to sell their
latest, greatest and more expensive products to
their customers.
They did this by providing their own brand of
financing/leasing to promote the sale of their
equipment. More significantly, they did it in such
a way as to virtually “lock-in” their customer to
them for time periods exceeding the original lease
terms by many times over.
This was accomplished by utilizing a technology,
fmv or operating lease agreement. When this
lease comes to it’s end, under the provisions of
the lease, the lessee has several options. They can
return the equipment to the lessor, buy the
equipment at “fair market value” or continue to
lease the equipment at the same payment originally
agreed upon at lease inception.
In order to protect themselves, a lessor will
include a “rollover” provision in the
documentation. This allows the lessor to
automatically extend the term of the lease for
additional periods of time, if the lessee does not
inform them in writing, in advance, what their
desired disposition of equipment will be at lease
end. These additional periods can be set for one to
five years, or from month-to-month, ad infinitum.
Until the customer informs the lessor in writing,
per the terms of the lease, what the desired
disposition of equipment will be.
During the course of the lease, a customer may
decide to switch hardware providers, or add
equipment to their existing configuration from
another vendor. Since the paper is held by the
original provider, this becomes very difficult.
Even another lessor introduced into this scenario
would find it very difficult to include this
equipment on a new lease. This is because it will
become a part of, or attached to, equipment from
a different manufacturer. So in theory it may
seem very convenient for a company to take
advantage of vendor financing to acquire the
manufacturer’s equipment. In the long run, from
a business standpoint, a lessee may sacrifice
much cost effectiveness and flexibility to do so.
In such a situation, the customer might consider
utilizing a third-party leasing or finance company
as an option to vendor financing. They may
determine that their options throughout the length
of the lease are more flexible and desirable, since
an independent lessor's only goal is to finance the
equipment at hand, not sell it. At the same time
they can usually obtain the same equipment return
provisions if they feel those are critical to the
operation of their business.
Leasing Programs”
The opposite end of the spectrum is “hard
collateral” lending. What types of transactions
should an equipment leasing independent be able
to handle on this type of equipment and/or the
refinancing of existing leases and loans?
Leasing of computer hardware and software came
into vogue in the 1970’s. Spurred by rapid
changes in technology and consistently rising
equipment prices, IBM and subsequent technology
manufacturers cleverly found a way to sell their
latest, greatest and more expensive products to
their customers.
They did this by providing their own brand of
financing/leasing to promote the sale of their
equipment. More significantly, they did it in such
a way as to virtually “lock-in” their customer to
them for time periods exceeding the original lease
terms by many times over.
This was accomplished by utilizing a technology,
fmv or operating lease agreement. When this
lease comes to it’s end, under the provisions of
the lease, the lessee has several options. They can
return the equipment to the lessor, buy the
equipment at “fair market value” or continue to
lease the equipment at the same payment originally
agreed upon at lease inception.
In order to protect themselves, a lessor will
include a “rollover” provision in the
documentation. This allows the lessor to
automatically extend the term of the lease for
additional periods of time, if the lessee does not
inform them in writing, in advance, what their
desired disposition of equipment will be at lease
end. These additional periods can be set for one to
five years, or from month-to-month, ad infinitum.
Until the customer informs the lessor in writing,
per the terms of the lease, what the desired
disposition of equipment will be.
During the course of the lease, a customer may
decide to switch hardware providers, or add
equipment to their existing configuration from
another vendor. Since the paper is held by the
original provider, this becomes very difficult.
Even another lessor introduced into this scenario
would find it very difficult to include this
equipment on a new lease. This is because it will
become a part of, or attached to, equipment from
a different manufacturer. So in theory it may
seem very convenient for a company to take
advantage of vendor financing to acquire the
manufacturer’s equipment. In the long run, from
a business standpoint, a lessee may sacrifice
much cost effectiveness and flexibility to do so.
In such a situation, the customer might consider
utilizing a third-party leasing or finance company
as an option to vendor financing. They may
determine that their options throughout the length
of the lease are more flexible and desirable, since
an independent lessor's only goal is to finance the
equipment at hand, not sell it. At the same time
they can usually obtain the same equipment return
provisions if they feel those are critical to the
operation of their business.
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© 2007 Equipment Funding Resources
All Rights Reserved
Contact person: Tom Tolman
Phone: 800-982-5868 ext# 113 Fax:
800-555-4322
E-mail: tom_tolman@yahoo.com
Site: http//www.equipmentfundingresources.com
All Rights Reserved
Contact person: Tom Tolman
Phone: 800-982-5868 ext# 113 Fax:
800-555-4322
E-mail: tom_tolman@yahoo.com
Site: http//www.equipmentfundingresources.com
EQUIPMENT LEASE FINANCING
Seven Traps to Avoid
Seven Traps to Avoid
