Equipment Leasing Scoundrels

Today’s subject is one that this writer will attempt to present without naming names as many would prefer or without incriminating anyone in particular. That said, however, if you are a company that fits into one of these categories, has engaged in this type of business practice in the past, or you are a sales guy for a company that handles their business affairs in this way, the SHAME ON YOU! Fortunately, this group represents a very small percentage of the otherwise hard-working, honest, and reputable equipment leasing companies taking care of their client needs every day.

In any industry, regulated or unregulated, there are always individuals who seem to gravitate to the dark side of any business transaction and attempt to give nothing and expect payment in return, expect payment first and then give nothing or disappear, knowingly mislead or deceive a potential client in the sales process, or flat out lie and cheat their way to temporary prosperity, usually on the back of those who can least afford it.

Here are a few of the warning signs that should act as red flags in any equipment leasing transaction:

To good to be true terms or interest rate

We recently were presented with an opportunity to bid on a company’s technology refresh. It was expected to cost approximately $800,000 and funded over a 60-90 day window as the installation took place and some tenant improvement was initiated. We were happy to provide an honest quote since this is our specialty, and we are rarely beaten by anyone, especially another leasing company.

In this situation, we were informed that another company had been selected and that they were half the cost of our proposal. We attempted to provide some tasteful direction without speaking ill of anyone since that is not our style, but we knew something was wrong.

It is unsurprising to us to get a frantic call from this same client asking if we will still honor our original proposal and if we can fund in the next 48 hours. Everything went wrong with the “too good to be true” quote, and the client was left holding the bag and facing penalties for non-payment of equipment already ordered. We could execute our docs quickly at, yes, the original quote, even though a premium should have been applied due to the rushed paperwork that required our staff to work overtime to get them handled. We could also coordinate payment with vendors to avoid penalties, ensure equipment is delivered and installed, and ensure the client’s business operations remain uninterrupted.

Deposit can’t or won’t be returned

In any leasing transaction, it’s not uncommon for a deposit or the first and last month’s lease payment to change hands while final approvals and funding are underway. Unfortunately, companies in our industry use that deposit as their meal ticket instead of actually planning on funding anything. If a client is not approved for financing, the leasing company refuses to return the deposit or retains 50% of it as a processing fee.

This type of problem usually arises from a client needing financing badly, going to one of the “You’re approved for $250,000 immediately” vendors, and then getting swept up because their need is pressing. Real leasing companies return the deposit without issue unless there is some fraud from the client. Yes, some uneducated or ill-advised companies try to exploit the leasing company by submitting fraudulent information.

Bait and Switch

And you thought it only happened in retail?  Even in our industry, many proposals go out as expected with the correct terms, and all look good. Then, all of a sudden, as funds are expected to be sent for an agreed equipment purchase, the leasing company will call and say there was some irregularity in the company, which will require an amendment to the master lease and scheduled terms and funds are frozen, leaving the client company in a real mess.

Yes, there are times when flexibility is needed since any business process is never perfect, and we just deal with it. The companies that routinely use this approach, knowing that everyone gets squeezed for more in the 12th hour, are the ones that fall into our SCOUNDREL group.

Equipment Orders Get Messed Up

Once a leasing contract has been signed and all funds have been approved, the funding process is complex and challenging. Our projects are often complex, with multiple vendors, scheduled upgrades, deposits, and progress payments to contractors and equipment suppliers. Then, there is the usual paperwork involving insurance, verified delivery and installation, inspection of equipment to ensure all is in order, and a hundred other detail issues that are required.

We happen to have one of the best, and I mean BEST, document management teams in the industry. Unfortunately, many other leasing companies are plagued with problems after the lease is signed because they can’t move money as expected, orders are misplaced, incorrect, or lost, and basically, there is a lack of attention to detail or a document department that is short-staffed to handle the most important part of the equipment leasing transaction.

There are many other areas that our infamous group of SCOUNDRELS excels in, but I will leave those for the next series. As an equipment leasing company that is large, well-funded, has a spotless reputation, and has served some of this country’s largest corporations, we routinely fix problems in the market as they arise. It would be easier if equipment leasing customers would do a little more research on their chosen provider and not just assume that all is well with a low-ball quote.

In the meantime, we will continue to work on solving the equipment leasing needs of our clients and anyone else who really needs a change from their current situation.