Equipment Lease Agreement

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An equipment lease agreement is a contract where the lessor (owner) lets the lessee (borrower) use the equipment for a stated period in exchange for payments. It is to be noted that the lessor is the owner of the equipment. The equipment's subject can be anything ranging from vehicles to factory machines or any other equipment. On the other hand, the lessee is the consumer concerned who is aiming to borrow the equipment. To agree on the lease, both parties come together to discuss the terms and conditions. A certain amount of payment is decided based on the duration of the lease. However, despite the agreement, the lessor has the right to terminate the equipment lease. This can arise when the lessee or the borrower engages in illegal activities.

Steps to Prepare for an Equipment Lease Agreement

Below are the steps you need to prepare for an equipment lease agreement:

  1. Identify Equipment Needs. The first step to preparing for an equipment lease agreement is identification. You should identify the equipment you need for the firm and also look at its associated costs. This will prevent you from wasting your time, thus allowing you to get the equipment rapidly.
  2. Review Finances. Next, you need to review your finances and budget. Thus, carefully review your company's finances and decide if the leasing option is affordable. This can be achieved by checking your firm's cash flow, credit history, and other financial obligations.
  3. Determine the Time Range of the Equipment. Deciding the period until you want the equipment is a necessity. This is because it influences the rental services, which are mainly short-term rentals and facilities that offer equipment sharing. If it is for a short period, choose a short-term rental service. For an extended period, you can consider a loan or credit. However, decide on it carefully, as banks are known to deny 85% of applications.
  4. Research about the Equipment. Thorough research about the equipment is necessary. This is solely because it should be connected to the latest technology. This will help in making a better investment and thus effectively determine the equipment’s nature.
  5. List out Different Leasing Companies. Evaluating companies providing leasing services is paramount. Certain lease lengths, monthly payments, and end-of-lease options may be favorable for you. Thus, list out the companies you might want to collaborate with and give it a go.
  6. Decide on Leasing the Equipment. Although the equipment might favor you, some companies may not deal in leasing the instrument. Thus, reach out to the firms you have shortlisted and enquire about them. Some companies specialize in specific industries. Approaching them makes your experience easier as you get additional guidance, too.
  7. Organize the Documents. After this, organize the documents and other requirements needed to lease the instrument. The documents can include balance sheets, income statements, etc. Please note that the documentation process differs from company to company. Thus, you must cater to the needs of any company for which you might want to lease the instrument.

Note: You can consult a lawyer to review your equipment lease agreement if you already have an agreement.

Steps Involved in Applying for an Equipment Lease

The following are the stages of an equipment lease application.

  1. Meet the Lease Company. The first thing is to meet with the lessee and lessor. Also, they get to know about their choice in leasing options, types of equipment that are being leased, and others. The company also gets to know its lessee’s requirements.
  2. Apply with Required Documents. Following up on this document requires gathering all required papers. Financial statements, credit history, and other necessary documents have to be collected for underwriting by the company so as not to approve or decline your request.
  3. Undergo Document Review and Underwriting. In the third process, it is expected that there will be a review of your submitted documents. During this time, there will always be an underwriting process involved, too. Prepare for this stage and equip yourself with the necessary information so that you can get the equipment before.
  4. Receive a Lease Estimate. If your application passes through successfully, a preliminary lease estimate will be sent to you. It should contain the costs and terms of the lease based on available data. Be cautioned that any mistake issued from this point might lead you to problems in the future.
  5. Review the Lease Terms. Also, look through any terms about leasing before signing it. The interest rate must thus be noted down carefully; how often do I pay? This is open for negotiation if one wants, but generally, lease agreements tend not to be negotiated upon.
  6. Sign the Lease Agreement. Having a clear understanding of these guidelines is paramount when appending your signature hereafter. Signing can be made online or physically where applicable. Each company has different guidelines; thus, follow them correctly in such situations.
  7. Fund and Receive the Equipment. The leasing company gives out money after making an initial payment towards buying what is needed most currently. Not only that but then if you keep buying from manufacturers, it may also lead them into paying directly for these things, hence becoming costly too. The time within which these items will serve depends on who made them.