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If you’ve made the decision to lease some
equipment you need for your business, how do you find the company that
is best for you?
With several thousand leasing companies in the U.S., how do you choose
the one that will meet your needs?
First, leasing companies differ in a number of important ways. Some
leasing companies generalize while others specialize. The companies that
specialize concentrate on specific industries, types of leases, certain
types of equipment, or sizes of transactions.
For example, some leasing companies specialize in a single industry such
as health care, agriculture, printing, or transportation. By
specializing, they are able to tailor lease transactions to the specific
needs of customers in a given industry.
Other lessors focus exclusively on a type of lease, such as operating
leases for equipment or offering their lessees attractive monthly
payments in return for the lessor retaining ownership of the equipment
at the end of the lease. These lessors hope that the equipment will
yield attractive residual values and result in higher transaction
yields.
Some lessors specialize in offering full-payout leases. These leases,
like installment loans, allow the lessee to keep the equipment at the
end of the lease by charging a nominal purchase amount. The lessee can
calculate the transaction rate similar to the way a loan is calculated.
Still other lessors focus on the size of the lease. Small leasing
companies specialize in transactions that are less than $100,000.
Lessors keep the lease amount relatively small so that they are able to
granulate their lease portfolios. They believe that a granulated
portfolio helps them reduce their overall credit risk. Lessors employ
credit scoring systems for small ticket leases to assist them in making
credit decisions. Small-ticket lessors require that company principals
guarantee the lease.
Leasing companies differ in their resources and capabilities. Most large
leasing companies are owned by banks, financial companies, or large
industrial concerns. These companies usually have abundant resources and
much expertise in a number of equipment leasing specialties.
Mid-size and smaller leasing companies outnumber the large lessors.
While these companies cannot match the resources of the larger
companies, they often have highly skilled professionals, plenty of
resources, and more flexibility in meeting lessee needs.
More than 80 percent of U.S. leasing companies are classified as lease
brokers. Similar to insurance or real estate brokers, lease brokers are
independent lease originators. They make their profit by placing lease
transactions with the right financing sources for the transactions.
Lease brokers can be especially useful in finding sources for difficult
or weak credit transactions, and they excel in placing highly
specialized transactions. You should only work with a lease broker with
high integrity and a good understanding of leasing and your market.
It is important for you to understand the specialty of each lessor
bidding on your lease transaction. To get the most attractive lease
transaction and avoid the runaround, stick with lessors who offer the
type of lease you are seeking.
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