FACTORS TO CONSIDER BEFORE FINANCING AN ASSET

As a lessor, there are certain factors you need to put into consideration before you finance any asset. This will enable you determine whether an asset is worth financing or not and thereby enhance your profitability. They include:

  • What is the purpose for the lease?
  • Does the lessee have sufficient cash flow to make payment?
  • Does the lessee have sufficient capital to provide a financial cushion in times of stress?
  • Does the owner provide support for the company and lease?
  • Does the equipment have value now and in the future?
  • Your Knowledge of the asset in its entire ramification in case of any consequence
  • Is the asset of limited use e.g. flight simulator, mail sorting machine or equipment to be used by department of customs for striking or special operation?
  • What happens in case of default? Can it be easily repossessed?
  • Does the asset require another attachment to function?
  • Who are the alternative users?
  • Is the model popular e.g. Toyota Corolla, Lister Generator etc.
  • How much value it commands in the second hand market?
  • Does the asset require special license to use?
  • Ethical consideration – drugs processing, obscene use
  • Maintenance, technology, spares etc.