Category: Best Practices

 9 KEY WAYS TO WIN THE DEAL AND OUTSMART COMPETITION Have knowledge of the lessee’s needs which involves recognising that each customer is different from others. Gaining the comprehensive knowledge about customers’ needs and preference, sets the stage for outsmarting competition. Understand the benefits of leasing and how they apply to the lessee’s needs Tailoring the lease to meet customer’s needs by providing varied options to cater for the diverse needs Communicate all the benefits of leasing to potential/existing…

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Several activities may be performed by the lessor at the end of lease. These include negotiation with the lessee and the first thing to do is to look at the lease agreement to ascertain the end of lease rights and obligations. The agreement may for instance provides for renewal, purchase or return of the leased asset you should look for a win –win situation Start the negotiation by asking for more than you actually want. This creates flexibility and…

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These involve several ingredients including: ¨ Identifying the type of lessee: Are they those that need to lease (motivated only by cash consideration e.g. MSMEs or those that want to lease (motivated by other factors apart from cash e.g. large corporate organisations. The approach to the two types of lessee will be different ¨ Knowledge of the lessee’s needs (who, what ,when ,where, and how) ¨ How can products be developed to meet these wants and needs? ¨ Understand the benefits of leasing…

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  The Equipment Leasing Act (the new law on leasing in Nigeria), provides guide on how you must drive your business in a way and manner that does not put you at any form of risk. The compliance issues include: Lessors (owners of asset) shall be a limited liability company with its (MEMAT) having express provision to engage in equipment leasing business Registration with the Equipment Lease Registration Authority. Registration of leased equipment within 14 days or 3 months…

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WATCH OUT FOR THESE RED FLAGS IN THE ANALYSIS OF PROSPECTS’ BUSINESS PROPOSAL AND OPERATIONS. Before you finance a lease for a lessee (user of asset), there are several factors that portend danger in the performance of a firm, especially corporate customers.. These can make the difference between success and failure in undertaking a lease agreement. Some of these factors include: i           Overtrading – which is a situation whereby a firm takes on more business than it can conveniently…

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Complexity is the degree of sophistication of the asset in terms of engineering design specification, which the lessee must aver to in writing to the lessor that it is operationally appropriate for its business. This reduces the risk of downtimes and the ability to yield revenue targets needed for servicing the lease rentals. In addition, the more technologically complex the asset is, the greater is the need for the lessor to insist on protective mechanism of its interest. Currency…

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Capacity is the ability of the lessee to honour his financial obligations to the lessor and other creditors as determined by the assessed viability of the business or intended use of the lease facility. This can be done by appraising the profits which are the main source of funds for servicing the lease rentals payments. Profits should be growing at an increasing rate or at least remain stable over time. The fixed charge coverage ratio is expressed as: Earnings…

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In any venture, the question of risk cannot be overlooked in the sense that the investor is taking the chance that the investment might not eventually yield the desired return or the actual cash flow might fall below expectation. Hence, in every investment particularly leasing, risk must be analysed. Risk may be defined here as the possibility that an expected stream of earnings or cash flows may have associated with it, the undesired chance of non-attainment. This non-attainment often…

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As a lessor (owner of asset), you have two objectives in arriving at IRR (interest rate) for lease: to be competitive and ensure adequate return to cover all cost and satisfy shareholders. To be competitive, you must always keep abreast of market rates and then attempt to stay within that range. There are two approaches to ensuring adequate return. The first which is commonly used is to take the average cost of debt, add the needed spread to stay…

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The assessment of the various risks confronted by a lessor (owner of an asset) continues with these: ADDITIONAL RISK ELEMENTS Several other risks may impact the credit decision but may not be apparent at the time of initial risk assessment. These risks are equally important and need to be fully considered. i. Funding Funding mismatch is a major risk that may affect the lessor’s operation. A lease may be financed on a fixed or variable rate basis. It is…

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