This month’s blog series has been focusing on preparing for the upcoming new year. The first week of December, we talked about business planning and last week was reviewing your real estate lease. This week we are going to stay on the topic of leases, but move to a different kind of lease – equipment leases. Not all business have equipment leases, but those that do (or those that are thinking of entering one) have special things that they need to consider.
We are going to focus on three areas: (1) reviewing your equipment lease, (2) preparing to enter into a new lease, and (3) checking the status of any UCC filings. Doing certain tasks related to each of these areas can help make sure that you are ready for a successful new year!
If you have current equipment leases, you want to review them at least annually. Most equipment leases have automatic renewal terms in them. These terms are many times not favorable to the small business owner. You may be paying high prices for outdated equipment. By finding out if the equipment lease automatically renews, you can negotiate a better contract prior to the renewal or cancel the automatic renewal and find another company to work with. For example, you may have leased a copier and have two year old technology now. However, you may be paying the same monthly price for renting the equipment next year that you paid two years ago. As the equipment is two years old, the price for renting it should be going down. By knowing that the equipment is set to automatically renew, you can contact the copier company and say either they need to lower the monthly payment or take your business elsewhere and have a fancy new copier this next year! In addition, if you have had problem with your equipment, you may want to see if the lease includes maintenance and, if it is set to renew, will it continue to include maintenance. Maintenance can be costly if you have to do it on your own – and if you are renting, you won’t have anything to show for the costly maintenance when you turn the equipment back in.
If you are looking to grow (or are going to be needing a new lease for equipment because you aren’t automatically renewing your old equipment), and you are going to need new equipment, you need to have your financials in order. If you are looking for lease or lease to buy expensive equipment, the leasing company may want to do a credit check first and/or see your financials. If you have prepared a business plan, you may be able to get the financials directly from it. If not, you should be preparing for your upcoming taxes and be able to have the financials ready to go from that. If you have been bad about your credit, now is a good time to start looking at it – and if you are a small business, you will need to look at both the company’s and possibly your own credit. Having good credit can get you better terms and may make the difference between getting a lease and not getting one.
Finally, if you have leased equipment in the past (and to be honest, even if you haven’t), it is a good idea to check online to see if there have been any UCC filings against you or your business. You can check with the Secretary of State’s Office online by searching for your business name and your name. UCC filings show if someone is claiming a lien on your property if you don’t make a payment for debts owned to them. While a UCC filing is fairly common, if you have old ones that haven’t been removed and the underlying debt has been paid, you will want to get those taken care of sooner rather than later. You can contact the credit company directly or work with a small business lawyer like myself to get the matter cleared up.
As always, if you have any questions about your small business or need help with equipment leases, please call me today at 720-258-6647.