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Is Your Money Keeping Up With Inflation?
In today’s unpredictable global economy, you obviously never know what is going to happen next. Uncertainties and concerns regarding the Iraqi threat, North Korean crisis, and hidden terrorist cells and networks continue to loom in the...
Surplus Merchandise, the Direct Under Wholesale Source
The Austin Business Journal reported about a firm that ”buys and resells merchandise that has been closed out, overstocked or discontinued…to a wide range of retail outlets, from mom-and-pop shops to multinational chains such as...
The 21st Century Way To Build Equity
Here to stay and firmly established in the U.S. mortgage market, biweekly mortgage payments are gaining momentum. First introduced into the U.S. in the early 1980's by several small Northeastern Banks, the idea of biweekly mortgages has its...
The Creativity is King in Small Business
In my last article, “The Reality of Buying Wholesale,” we looked at some of the controls that the largest companies in the consumer goods market place on their distribution channels. As we learned, some of these companies make it impossible for...
Video Display
Video displays are most recent technique used in both outdoor and indoor environments.
Video displays are used to display live actions at either sporting event, cultural show, or any industrial event. These are widely used in today’s world’s...
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Warning - This Lease Might Explode Any Minute
Mike Caringi, owner of a small New Jersey business that sells pumps, found himself facing a gut-wrenching dilemma last summer. Should he continue paying $ 1,500 each month for essential telecommunications services he no longer receives and for leased equipment he claims was never installed? Or, should he stop making payments and face a potential lawsuit from the firm that financed the equipment under a ‘hell or high water’ lease? Mr. Caringi’s company is one of several thousand small companies around the country reeling from the bankruptcy of Norvergence, a reseller of telecommunications and Internet services. At the core of the quagmire facing Mr. Caringi and others is that Norvergence succeeded in getting customers to sign separate lease and service contracts that provided its services. When Norvergence abruptly shut its doors, it left thousands of its customers scrambling to replace telephone and Internet services while obligated to shell out over $ 200 million in lease payments to Wells Fargo Financial, CIT and 30 other leasing companies over the next five years.
How can you protect your company from being victimized in a similar situation? Certainly, most transactions involving equipment leased in connection with a related service carry some degree of risk. You can reduce that risk by taking certain precautions. First, where possible, avoid leasing equipment when the equipment is proprietary to a service. The chances are that you will be stuck with the equipment if the service provider fails. Make sure that the leased equipment has an underlying value that justifies the lease. By doing a present value calculation of all payments owed under the lease agreement and comparing that value to the fair market value of the equipment, you can see whether the lease value is reasonable. Check to see whether the equipment is used by other similar service providers, in case a switch in service
becomes necessary. Finally, make sure the equipment you will be leasing can be sold in the after-market. As a last resort, you may be able to cut your losses by having the ability to buy-out the equipment from the lessor to be resold to someone else.
Perhaps, one of the best protections in signing up for a service requiring leased equipment is to thoroughly evaluate the service provider before proceeding. Make sure the service provider is financially sound and has a long track record of providing excellent service. If possible, ask for and review financial information on the service provider. Do an Internet news search to make sure there are no troubling stories about the service provider. Be partial to services that offer equipment under contracts that tie service and use of the equipment together, such that your obligation to pay is conditioned on the service being provided. Lastly, since these transactions always carry some risk, make sure that an abrupt interruption in the service will not have a material negative impact on your company or cause a financial hardship.
George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (“LTI”), responsible for LTI’s marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.
Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: www.ltileasing.com.
gpmail129-groups@yahoo.com
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United States Small Business Administration |
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Online and print small business publication. Information to help start, grow or manage a small business. |
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Microsoft Small Business Center |
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