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Marketing
Marketing is divided into steps:
- Find The Lessee - The salesforce looks for lessees using several approaches; trade shows, advertising, direct mail, telephone surveys, bank correspondent relationships, service bureau affiliations and equipment vendors.
- Take an Ap - The lessee applies for a lease disclosing info about the lessee, the equipment being considered, how the lessee will use it, and the terms of the proposed lease.
- Check the Credit - Most leasing companies use credit bureaus and on-line scoring. Larger transactions require manual review by a credit analyst
- Document the deal - Each lease may have different requirements, depending on the type of lease, type or cost of equipment, lessee credit rating, and vendor program agreements. After the equipment is inspected by the lessee, he signs a delivery & acceptance certificate stating that the equipment is in good working order.
Funding
Funding is a rather time-consuming process. Besides paying the vendor, the leasing company sets up the accounting, billing and asset tracking process.
Other tasks include:
UCC filings - most lessors file UCC's with the state or county within 10 days of equipment installation to protect their rights to the equipment.
Insurance - lessors require insurance to protect against damage or loss of the leased equipment as well as liability associated with its use.
Servicing
- Billing and Collections - which includes following up on lessee that do not pay on time
- Rewrites and Adjustments - performed by lessors when lessees cannot meet their obligations
- Property and Sales Taxes - Most states assess personal property taxes to owners of capital equipment and charge either sales tax on equipment purchases or use taxes on rental income.
- Track Equipment - Some leasing companies send out confirmation notices to lessees to confirm that the equipment has not been moved
- Record Accounting Entries - At the end of every month, accounting entries must be booked to the general ledger. Here are just a few of the monthly entries an Accounting Department might make:
Lease income
Fee income
Depreciation
Tax Credits
Debt principal and interest
Commissions
Legal and court fees
Late charge and other miscellaneous revenues
Termination
When a lessor enters into a lease contract, he wants the lessee to make each payment on time and exercise the purchase option (unless the lessor intends to remarket the equipment).
Some leases do not go to the end of term. Here are three examples:
1. Buyouts
Occasionally, a lessee will decide during the lease that he wishes to purchase the leased equipment before the end of the lease term.
2. Upgrades
In this case, the lessee is interested in trading in his equipment, usually with the same vendor. The vendor is anxious to accommodate the customer, and since the lessor also wants more business, he is more inclined to discount the value of the old lease.
When a upgrade takes place, the lessor pays the vendor the net cost of the new equipment less the trade-in value of the old.
3. Non-performance
Despite all efforts to salvage problem accounts, lessors can end up with non-performing leases. Whatever the reason, the lessee does not make the monthly payment and becomes delinquent. When all work-out solutions have failed, the lessor must take legal action, or simply write off the account.
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