A Word on "Customized Equipment"

"Intangibles." Any leasing professional will tell you there are many intangibles involved in deals as they travel the timeline from inception to conclusion. From the time you send in your application until you finally sign your lease documents, every aspect of a prospective deal will be looked at by the underwriter. Sometimes, even when the numbers make sense, a deal may live or die depeding on one of these "intangibles."

One often seen in equipment leasing is when a customer is looking to acquire Customized or Specialized Equipment. It is one thing when a company is looking for a new 4-head silk screen printer, but when it is a "custom widget maker" made by an "Italian based company" that has 1 distributor and only 5 machines in use nation-wide, the underwriter is well within their rights to ask questions.

Understand this is basic risk management. Pros vs. cons. An underwriter wants the assurance that, in case the customer defaults (or when term of the lease expires), the equipment financed is not be obsolete or unable to be sold off. This alleviates useless items from taking up space in their portfolios. Usually this is nothing major, just a matter of making your "pros" more visible and assuring the underwriter that the equipment you are looking to lease has an actual application for your business. Be aware of your vernacular my friends.

Typically when a piece of equipment is under review, the underwriting source only requires something minor, such as limiting the term to a certain number of months or collecting an advanced payment pre-signing. They will even let you know that it is because you are looking to lease "industry-specific custom-equipment." Just think, if you were dealing with a bank (especially in todays conservative market), it might stick a fork your deal altogether... Even ~if~ the numbers work.

Imagine, what if the survival of your business is dependent upon the acquisition of a new piece of equipment?

Truth is... this is a very easy hot-point to keep from having disastrous reprocussions in the end. As a customer and business owner, relationships are based on trust. Especially with those who are financing major capital expenses. One should be able to trust them well enough with the knowledge of what is being bought and who it is being bought from. As a broker, it is ethically irresponsible (and darn near impossible) to get approval for a money deal if the manufacturer of the "widget maker: is unknown or is a phantom comany. It just does not make basic business sense.

So remember:

• Have full disclosure with your broker. It helps keep the suprises to a minimum. Trust is a good thing.
• Understand the more exclusive or custom your equipment, the more the lease will have to be explained to the underwriter. Don't worry.
• Most times the underwriter just needs a pacifier in order to feel more comfortable. :)
  

~Andy