Equipment Leases – Don’t Sing Those End of Lease Blues

Leasing is one of many financing tools available to help businesses fill their equipment needs. Leasing allows fixed rate financing and is usually accompanied with little or low up-front costs.

Most surprises, however, come at the end of the lease. By then it is too late to negotiate changes in the lease contract. The lease is “in place”–the customer has been making payments for some time period.

End of lease surprises can easily result in increased fees and automatic renewals.

There are nine things that businesses can do to avoid these surprises and minimize the risk for added costs and renewals.

1. Give Adequate End of Lease Notice: Give the leasing company adequate written end of lease notice. The most common notification period reads “no less than 60 days before the end of the lease.” Sometimes notification requirements are as long as nine months before the lease ends.

2. No More–No Less Than: Occasionally, leases say customers must give notice no more than 120 days and no less than 90 days before lease end. The means the customer has only 30 days within which to give notice. Miss giving timely notice and the lease renews automatically with the total lease cost increasing. The automatic renewal adds as much as 12 lease payments.

3. Certified Mail: Send all notices to the leasing company via certified mail. Faxes and emails are not sufficient.

4. Start Early: Begin negotiations well in advance of the return date, especially if you plan to purchase the equipment.

5. Payments Due: Verify the number of remaining end of lease payments using internal company accounting records. Leasing company payoff may vary due to how the leasing company recognizes lease payment timing. Sometimes this happens if late payment penalties are involved.

6. Late Fees: Negotiate all late fees… just because you can and should.

7. Property Taxes: Check property tax assessments on the final invoice. Verify that the charges agree with your state, county and city tax rates. Sometimes tax rate errors are uncovered at the end of the lease. This is the customer’s last opportunity to correct errors and receive refunds for tax rate errors.

8. Early Termination: If paying off the lease before the end of the original term, determine if discounts are applicable. Sometimes the lease language provides reasons for discounts. Check the default paragraph, the insurance paragraphs or end of lease section for discount justification.

9. Security Deposits: If the leasing company requires a Security Deposit at lease commencement, make sure the deposit is applied to the final payment or returned to your company at the end of the lease.

Leasing is one of many asset financing options available for companies. Not all leases are alike nor are lease contracts the same. When companies review leases thoroughly and negotiate them aggressively leases are tailored to fit company needs.

If companies do not review and negotiate leases frequently, they might consider retaining the services of an independent lease review specialist. These specialists assist companies in all phases of the lease selection, bidding and negotiation process. Their services save companies hundreds of thousands of dollars on every lease.

All About Coffee Machine and Equipment Leasing

Coffee Machine and Equipment Leasing

I have been a consultant involved in the Coffee World for some years, advising clients and helping them choose the right equipment to suit their needs. Equipment can of course be purchased with good old fashioned cash or a Business Loan from your Bank. However, the latter is not so easy these days. Another alternative that has seen growth in the last few years is Equipment Leasing. Leasing is available in many countries and certain Terms and Conditions vary. Tax benefits that Leasing can bring also vary from country to country. I can only speak from my knowledge of the UK market. I advise clients on many Coffee Machine Leasing packages to suit all their business needs. One thing the client doesn’t always realise is that they can add other equipment requirements to their Lease Agreement. For example; Kitchen Equipment, “front of house” equipment and fittings. You name it – It can be Leased.

What is Equipment Leasing?

Equipment Leasing is the process of securing the use of pretty much any type of equipment these days; Office equipment, Computers, various types of machinery. Within the Catering Industry this could mean EVERY piece of equipment used in the kitchen and “front of house”. Ovens. Toasting Ovens. Refrigeration. Ovens and Cooking ranges. Deep Fat Fryers, Food processors etc. Front of house equipment would not only include the very important COFFEE MACHINE, but may also include Panini Grills. Counters. Refrigerated Serve Over Counters. Tills. EPOS systems. Leasing can even be used to finance fabrication works, shop fittings, shop furniture, tables and chairs. Even structural building works can be Leased. All these things are needed but cost money, which is not always readily available. Therefore Leasing can provide the financial means to get the right equipment when opening a new coffee shop, restaurant etc. The other benefit is that Leasing can relieve cashflow. For established businesses Leasing can be used to refurbish and replace equipment.

By entering into a Lease contract to utilize equipment for a specified period of time, a business or individual can enjoy the benefits of usage without having the need for a large capital injection of CASH! Many industries make use of equipment leasing. In some instances, choosing to lease necessary equipment and machinery is an ideal situation for new or established businesses with very little working capital. Rather than investing large amount of limited resources, leasing necessary equipment makes it possible to secure more up to date models and focus on the task of growing the business.

The Changing Face of Finance

Equipment leasing and equipment finance has changed greatly in the UK in the last few years. The main change, as many business owners are painfully aware, is the lack of availability of funding and finance from the High Street Banks! Although this situation can also affect Leasing, Lease companies also have access to many other friendly industry capital funders. However, some funders will only finance established businesses. A bit of a “Catch 22″ situation. This is not always the case with Leasing. However, you have to find the right Lease Company. Some 75% of all Leases that I have arranged over the last few years have been for “New Start” businesses.

Obtaining conventional Business Loans from the High Street Banks is still not good. A recent report from the Federation of Small Business (2012) stated that 40% of small businesses had been refused credit from their Bank. Also, that Bank lending had fell by some 5%. This is despite calls from the UK Government over the last few years for Banks to increase their lending to business. The Business Secretary stated that Banks were still risk adverse and a constant source of frustration to the Government. However, there could be “light at the end of the tunnel” The Business Secretary announced in September 2012 of the creation of the Government backed “Small Business Bank.” The other good news is that Leasing increased during this period. Businesses have turned to Leasing to overcome the lack of Bank lending and been successful.

There are other advantages with Equipment Leasing. It’s Tax efficient. Please speak with your Accountant about specific Tax Benefits for your business. Equipment leasing is also an easy way to update equipment. Many lease agreements include provisions that allow older equipment to be exchanged for newer models. This option can be extremely helpful when a business outgrows the capabilities of an older piece of equipment and requires something more robust to keep up with company growth.

Lease Rental – Lease to Buy – Lease Purchase?

A word of warning with the term “rental.” Some Lease Companies and Suppliers don’t give customers the option to purchase outright. At the end of the Lease period the customer has to renew the Lease for a fixed period of time or give the equipment back to the Lease Company or Supplier. This obviously can create a serious problem. Ensure that suppliers of your equipment and the Lease Company involved give their customers the option to buy outright at the end of the period. This can usually be arranged for just for just one extra months payment in most cases. Other alternatives already mentioned are; half way through a Lease you can upgrade to a new/bigger/better machine, the same as you might do when buying a car. Also, if you wish, you can usually pay off the Lease early with no penalties.