Leasing Roles – understanding your obligations
These days, your commercial and personal financing options aren’t limited to bank loans. For many small businesses, there are a number of other finance providers out there that can help with getting the equipment they need.
Meanwhile, some businesses, especially suppliers, may want to look into offering their own financing to their customers in the form of vendor finance. The advantage of providing these services is the ability to attract new clientele and maintain long term relationships by offering total supply solutions rather than just the equipment itself.
If you’re thinking of signing a lease, whether as a lessor or lessee, it’s important to understand your obligations and the role your business plays in the agreement.
The lessee
If you’re looking to obtain commercial equipment and are looking to pay a monthly fee to someone for the use of the equipment, then you are looking to enter a lease agreement as a lessee. The actual nature of the agreement and your obligations will depend on the individual lease that you sign. For example, in some lease agreements, you may likely be responsible for the maintenance costs and repairs – while in other instances the lessor will agree to bear those costs.
At a most basic level, the lessee is responsible for:
– Making regular payments for the use of the equipment that is being leased. The frequency of these payments will depend on the agreed upon terms and conditions and can sometimes be a lump sum or can be regular instalments.
– The return or purchase of the equipment at the end of the lease term. As a lease is considered an arrangement for the lessee to pay for the use of the equipment, there is nothing in the lease term that stipulates the transfer of ownership so the equipment remains the property of the lessor. A separate agreement can often be made for the lessee to purchase the equipment at the end of the term.
The Lessor
As the lessor, you maintain ownership over the title of the asset and arrange for a lessee to pay for the use of the equipment that you own in an operating lease. As a lessor, you may offer to take care of maintenance and service fees into the lease term to make it easier for your clients – but this is dependent on the type of service you want to offer with your vendor finance. As a lessor, your main obligation will be to:
– Allow for the use of the equipment by the lessee for the duration of the lease term, provided payments are made. This means that you cannot make another arrangement for someone else to use the equipment before the lease term is up unless specific arrangements for terminating the lease are made.
Often, a lessor can arrange for insurance or a security deposit for the asset from the lessee before the commencement of the lease.
Processing your request, Please wait....
