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6 WAYS TO MITIGATE RISKS IN LEASING
March 2, 2018
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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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TIPS ON ASSET MANAGEMENT (Continued)
March 1, 2018
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Asset Register: maintenance of an up to date register of leased assets is very vital to the management of the lease portfolio. The asset register is better maintained by a computer program and should contain information such as name of the leased asset, serial number, tag number, location of the asset, name of lessee, servicing date, commencement date, terms of lease, cost of equipment, residual value. The purpose is to enable you to keep track of all the leased…

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TIPS ON ASSET MANAGEMENT
February 28, 2018
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Apart from checking the standing of the lessee, you also have the responsibility of ensuring that the asset under lease is well managed. This is fundamental to the overall achievement of your business objective, because the lessee will only be motivated to pay if the asset under lease is in existence and functional. The fact that you have little or no control on the usage of the equipment makes this task difficult. These include: Maintenance of Lessor’s Legal Right:…

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TECHNIQUES TO HELP STRUCTURE OFF BALANCE SHEET FINANCING
February 27, 2018
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In the course of your operations, if a lessee insists on off balance sheet financing, you must first of all ensure that the lease does not meet any of the 5 criteria including: i. Automatic ownership transfer ii. Bargain purchase option iii. Lease term equal to or greater that 75% of the asset’s economic life iv. Present Value of minimum lease payments equal to or greater than 90% of equipment cost v. Special purpose equipment vi. Techniques to achieve…

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STEPS INVOLVED IN MONITORING YOUR LEASES
February 27, 2018
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When servicing your customers, there are series of activities that you must perform to ensure that you are monitoring your investments. From the beginning of the lease to termination, these activities must be well coordinated, to ensure that the transaction is managed efficiently and effectively in line with the agreements reached between the parties. i.  Regular visit to the lessee – regular visit to lessee at his premises will give you first hand information on the ongoing performance of…

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HOW TO COUNTER COMMON OBJECTIONS IN LEASING
February 25, 2018
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| Best Practices, Poor Practices

It is not uncommon in the course of marketing your leasing business, whereby you come across stiff objections from prospective lessees, either real or perceived. This equally applies to all types of business. More importantly, you should know how to counter each objection keeping in mind that real objections do not really have a counter. You need to learn how to dance around them. The list of common objections to leasing includes: i. Leasing is more expensive ii. The…

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HOW EQUITY CONTRIBUTION CAN IMPLICATE YOUR BUSINESS
February 24, 2018
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| Poor Practices

It has become imperative to bring to the fur the negative impact of equity contributions in leasing transactions and to alert you of its consequences on your investment. Perhaps to have the commitment of the customer, many lessors ask for equity contribution from the customer, while this is not illegal, it connotes a different transaction entirely, which is not leasing.  By its legal nature, leasing does not envisage any proprietary right on the lessee during the entire duration of…

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FACTORS TO CONSIDER BEFORE FINANCING AN ASSET
February 23, 2018
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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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OPERATING LEASE: THE FUTURE OF LEASING BUSINESS
February 22, 2018
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In the recent times, it is imperative to fully understand as a lessor that the business of leasing has tilted towards operating leases, due mainly to the operators’ response to market changes. This arises from the dictates of market by corporates willing to divest from other ancillary duties thereby contracting it out to firms that specialises in such duties, this gives them the priviledge to focus squarely on their core business. Equipment Leasing Act (ELA 2015) Definition of Operating…

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10 ENDS OF LEASE STRATEGY
February 19, 2018
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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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