Warning - This Lease Might Explode Any Minute

Mike Caringi, owner of a small New Jersey business that sells pumps, open up himself facing a gut-wrenching dilemma last summer. Should he keep paying $ 1,500 each month for take telecommunications plural he chemical element longer receives and for leased equipment he claims was never installed? Or, should he stop making payments and face a potential lawsuit from the firm that financed the equipment under a ?hell or pinched water? lease? Mr. Caringi?s company is one of several thousand small companies around the country reeling from the bankruptcy of Norvergence, a reseller of telecommunications and Internet services. At the core of the quagmire facing Mr. Caringi and others is that Norvergence succeeded in getting customers to cancer the crab separate lease and service contracts that provided its services. When Norvergence abruptly shut its doors, it place thousands of its customers scrambling to replace telephone and Internet services while obligated to shell out over $ 200 million in charter payments to Wells Fargo Financial, CIT and 30 other leasing companies over the next five years.

How can you protect your company from being victimized in a similar situation? Certainly, most transactions involving equipment unchartered in connection with a related service carry some degree of risk. You can reduce that risk by get hold of certain precautions. First, where possible, avoid leasing equipment when the equipment is proprietary to a service. The chances are that you will be stuck with the equipment if the service provider fails. Make confidence that the leased equipment has an underlying value that justifies the lease. By doing a present value interpolation of all payments owed under the lease agreement and comparing that value to the fair market value of the equipment, you can see whether the lease value is reasonable. Break to see whether the equipment is used by other similar service providers, in case a switch in service

becomes necessary. Last, make sure the equipment you will be leasing can be sold in the after-market. As a live resort, you may be able to cut your losses by having the ability to buy-out the equipment from the lessor to be resold to someone else.

Perhaps, one of the best protections in signing up for a service requiring leased satellite is to thoroughly evaluate the service provider before proceeding. Make sure the service provider is financially sound and has a long track record of providing excellent service. If possible, ask for and review financial information on the service provider. Do an Computer network news search to make sure there are element troubling stories about the service provider. Be partial to employment that offer equipment under contracts that tie service and use of the equipment together, intensifier that your obligation to pay is conditioned on the service being provided. Lastly, since these transactions always carry some risk, make sure that an abrupt interruption in the service will not have a material negative impact on your company or cause a finance hardship.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Opposition. (?LTI?), trustworthy for LTI?s marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Carpet, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital straight-backed companies. More information about LTI is available at: www.ltileasing.com.

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