You have made the decision to lease some needed equipment for your business. With several thousand leasing companies in the U.S., how do you find the one that is best for your firm? The reality is that leasing companies differ in a number of important ways. Some leasing companies generalize while many specialize. The ones that specialize concentrate on specific industries, lease types, certain equipment types, or in transaction sizes. For example, some leasing companies specialize only in a single industry like health care, printing, agriculture, or transportation. By doing so, they are able to structure lease transactions tailored to the special needs of participants in a given industry. Others lessors focus exclusively on a lease type. They may only offer operating leases for equipment, offering their lessees relatively attractive monthly payment amounts in return for the lessor retaining ownership of the equipment at lease end. The hope of these lessors is that the equipment will yield attractive residual values, thereby resulting in higher transaction yields. Some lessors specialize in full-payout finance leases. These leases are similar to installment loans in that the lessee usually gets to keep the equipment at lease end by paying a nominal purchase amount. Additionally, the lessee can calculate the transaction rate in a way similar to that of a loan. Still other lessors focus on lease size. Small ticket leasing companies specialize in transactions less than $100,000. By keeping the lease amount relatively small, lessors are able to granulate their lease portfolios. They believe that a granulated portfolio helps to reduce overall credit risk. For small ticket leases, lessors employ credit scoring systems to assist in making credit decisions. One of the requirements of lessors specializing in small ticket leases is that company principals guarantee the lease. Leasing companies differ in resources and capabilities. Many large leasing companies are owned by banks, financial companies, or other large industrial concerns. These firms usually have abundant resources and expertise in a number of equipment leasing specialties. Mid-size and smaller leasing companies greatly outnumber large lessors. While these companies cannot match the resources of their larger brethren, they often have highly skilled professionals, sufficient resources and more flexibility to meet lessee needs. More than eighty percent of U.S. leasing companies can be classified as lease brokers. Lease brokers are independent lease originators that serve roles similar to insurance or real estate brokers. They profit by placing lease transactions with the ultimate financing sources for those transactions. Lease brokers can be useful in many ways, particularly in finding sources for difficult or weak credit transactions. They also excel in placing transactions that are highly specialized. Only work with lease brokers who have high integrity, a good understanding of leasing, and an understanding of the market you are in. It is important to understand the specialization of the lessors bidding on your lease transaction. To get the most attractive lease transaction and to avoid the run-around, stick with lessors who focus on the type of lease you are seeking. |
