Category: Lease Advice

Leasing is similar to other forms of equipment financing. However, it has distinct nature from the other methods. i. Hire Purchase – the assets are delivered to a person who agrees to make periodical payments by way of hire with an option to purchase. There are two transactions i.e. Hire and purchase combined into one. A lease is technically a hire contract without more. So when a lease contract gives the lessee an option to purchase, it takes the transaction…

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Just like there are advantages of leasing to a lessee (the user of an asset), so are there benefits of leasing to a lessor (owner of an asset).  The factors that encourage a lessor to provide leasing facilities include: Leasing widens the market for a manufacturer/dealer of equipment. Thus, a manufacturer/dealer can offer lease arrangement without necessarily investing additional capital. Lease rental income received periodically is easily predicted on which future cash flow projections can be made for planning…

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Lease structuring is done after the lessor has established the risk profile of a particular transaction. Sometimes the lessor might not be sufficiently certain that the lessee will meet his rentals as they fall due. To overcome this uncertainty, it may be necessary to require some form of credit enhancement. However, credit enhancement should not be the reason for entering into a lease with what otherwise would be unsatisfactory lessee. The following techniques are used to compensate for increased…

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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…

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Generally, the stronger your position as a lessor, the stronger your stands in the negotiation process, Amembal&Halladay (1995) gives the following 10 key steps to developing a successful end-of-lease strategy, maintain positive environment during negotiation process and promote a favourable outcome: You should always look for win-win situations. If the lessee has the perception that you have made certain concessions, it will feel more satisfied with the final outcome. You should always start negotiations by asking for more than…

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  The Equipment Leasing Act 2015 provides that: i. The lessee shall not remove the leased asset from Nigeria without the written consent of the lessor ii. The lessee shall be liable for repairs to damage caused by his act, agent or servant or any third party to a leased equipment (s, 24) iii. Lessor is generally not liable for any defect in fitness for purpose of leased asset, except the lessee suffers loss as a result of reliance…

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  The robust activities in the sector and continuous growth premised on the above developments, present enormous opportunities for investors. For instance, the deregulation and liberalisation of the port sector has given additional impetus for private initiatives in terminal operation. Investment in the provision of: i. Terminal facilities for container operation is available for private interest through different public–private sector interest such as leasing; Build Operate and Own (BOO); Build Operate and Transfer (BOT) in the different segments of the…

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  The following are success factors for playing in the Nigerian healthcare system: Design lease products with the following attributes: i. Target a specific market based on well-defined criteria ii. Using credit parameters, defines acceptable prospective lessees within that market. iii. Simultaneously include and exclude prospective customers (credit parameters are used to exclude prospective customers) Establish a target market using the following criteria: i. Type of equipment – You may only be interested in leasing certain types of equipment…

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Succeeding in the leasing world require lessors to guide against certain pitfalls while documenting their transactions. Some of these pitfalls include: i. Equity Contributions — The word equity connotes ownership. Therefore asking for equity contribution in a lease transaction no matter the percentage gives the lessee a proprietary interest in the leased asset and in the event of default, the lessor will not be able to repossess since the asset is deemed to belong to both parties. The same…

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