| Some business owners look over equipment | | | | |
| leasing contracts carefully. They make notes | | | | For 30 or 60 days, your lessor is free to |
| and question obscure language. They then | | | | earn interest on your cash. You can try to |
| send the document to their lawyer for review | | | | negotiate this if you pay attention. |
| and request that changes be made. The | | | | |
| attorney then contacts the leasing company to | | | | Equipment leases can be short or long term. |
| negotiate the most favorable terms. How | | | | They cover goods ranging from heavy |
| often does this chain of events occur? Very | | | | construction equipment to telephone systems |
| rarely. | | | | and copying machines. Some questions, |
| | | | however, relate to leases of many different |
| Managers tend to skim through the contract. | | | | kinds of equipment. |
| Most agreements are on forms, so little | | | | |
| thinking happens and big problems occur. | | | | Lessees need to know, for example, whether |
| Nowhere is this more true than in equipment | | | | they can move equipment to a new location |
| leasing. | | | | without written consent for which they may |
| | | | have to pay. Computers and other technology |
| Remember, the only time you can negotiate is | | | | products need upgrades often. You need strong |
| up front. Once you've signed off, you're | | | | lease language if you want the lessor to pay |
| obligated.. Here are a few things to know and | | | | for upgrades, adding costs to lease payments. |
| understand about equipment leasing. | | | | |
| | | | Much the same holds true for alterations and |
| Choose and experienced lease broker: | | | | modifications, which leasing companies |
| | | | usually accept when they're easy to remove. |
| Make sure your broker has an adequate number | | | | Additions and alterations, however, may be |
| of leasing companies he deals with. A broker | | | | taxable income to the lessor. |
| worth his salt will pick the right one for | | | | |
| your situation and needs. | | | | Lease Termination |
| | | | |
| Don't pick a lessor first: | | | | Early termination probably is the most common |
| | | | equipment leasing problem because you can't |
| Make them compete for your business. Once a | | | | sell goods under a lease. You're a lessee, |
| vendor has your account, there's not much | | | | not an owner. |
| motive to negotiate. | | | | |
| | | | Often, the termination price is the total of |
| Know What you Want: | | | | all payments remaining. Other approaches |
| | | | involve preserving the lessor's |
| Expand your knowledge. Know your lessor. Will | | | | originally-anticipated yield. If you haven't |
| upgrades and additional needs be provided? | | | | done so already, this is a good time to call |
| Will the lessor help with regulatory changes? | | | | your accountant to help you make the best |
| What about flexibility at the end of the | | | | possible deal and to understand it. |
| lease? | | | | |
| | | | Provisions for early termination, early |
| Know your equipment: | | | | buyout, subleasing and assignment protect |
| | | | lessees. They are not, however, going to be |
| Will it become obsolete during the lease | | | | in that printed-form contract, and they're |
| term? Will you need more of it? Less? Most | | | | not going to be in the deal at all unless you |
| equipment leases start with acceptance or | | | | put them there. |
| commencement. On that date, you inspect the | | | | |
| product and pronounce it fit for service. | | | | Other provisions protect you when the lease |
| Then it's yours, even though the equipment is | | | | ends. De-installation date is a key |
| in a lessor's warehouse or in a boxcar. Your | | | | provision. Do you dismantle equipment, crate |
| lease shouldn't begin until you're using the | | | | it and ship in on your dime or the lessor's? |
| equipment successfully. | | | | |
| | | | Don't take anything for granted. Most form |
| Make sure the equipment works: | | | | leases require shipment to anywhere in the |
| | | | United States. Maybe you can cap that, or |
| All equipment leases include a non-negotiable | | | | limit it to a specific distance such as 100 |
| "hell-or-high-water" clause that makes you | | | | miles. If you want to keep items, can you do |
| pay regardless of whether equipment works. | | | | so and still send back part of the equipment? |
| Unless you love paying for equipment that | | | | |
| just sits there, be certain it operates when | | | | Most leases state a "fair market value" at |
| you accept it. If things are complicated put | | | | which you'll return goods to the lessor. You |
| an engineer or other expert on it. Remember, | | | | need to understand how that's calculated and |
| once you accept, you pay every month. | | | | what charges it includes. Again, this may be |
| | | | a good time to talk with your accountant. |
| Alternations and other details: | | | | |
| | | | Equipment leasing continues to be a |
| Most lessors buy equipment from manufacturers | | | | significant source of financing for |
| or wholesalers before they deliver it to you. | | | | businesses of all sizes. To maximize its |
| Then they take your money and, perhaps a | | | | many advantages, however, you must study |
| month or two later, pay on account to the | | | | every detail in the contract. |
| manufacturer or wholesaler. | | | | |