ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: Can I still lease in this environment?

Saturday, January 31, 2009

Can I still lease in this environment?

This is a question I am getting asked more frequently as the financial system continues to lack in stability. The short answer is Yes you can.

What is different now?

1) Credit underwriting guidelines are tighter.
This is no big surprise but get the obvious one out of the way. When companies have less $$ to lend and fund, guidelines tighten

2) More due diligence and restrictions
Since tough times usually see increases in criminal and fraudulent activity, due diligence is on the rise for lessees and their vendors selling them the equipment they need. Also, more industries and other circumstances are becoming restricted.

For instance, 2 of my funder partners examined their portfolios and found an unreasonably high % of defaults from lessees in California. So a policy change was announced at both, in the form of a freeze on new business origination in CA. This kind of internal credit and portfolio examination is commonplace now.

3) Startups are more difficult and more restricted
Startup businesses are tougher generally and certain industries like restaurants, startups have been restricted almost entirely.

4) Funders going out of business
Some funders are going out of business entirely or are getting out of the broker originated so it means that there is less choice out there than there used to be for funding leases.

5) Lease rates are increasing
See # 4 above. Also, lease rates are increasing thanks to the market for Treasury rate swaps, an instrument where a rate of interest on Treasuries is traded (swapped out) for the monthly payment stream on the Treasury (more to come in a future entry on this topic). These swaps are not the cause of the financial market meltdown though, as those swaps are known as credit default swaps.

So these 5 things are the major changes but leases are still being approved and funded. So while some deals in some of these areas are more difficult to do than they used to be, there are still many places, sources and resources available for funding leases.

Equipment leasing remains one of the best and most widely available sources of capital for a business even in today's environment.

Southern Lending Solutions

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