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.
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Types of Equipment Lease Agreements

Each type of equipment lease agreement is different. This is because they cater to the various needs of various lessees. Thus, you must know the various types of equipment lease agreements.

Other types of equipment lease agreements are the following:

Key Terms for Equipment Lease Agreements

Final Thoughts on Equipment Lease Agreements

Prepare well and apply for the correct equipment lease suiting your firm's needs. Following these steps will sincerely benefit you in gaining the right equipment lease agreement. Thus, implement them carefully.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Free Consultation Phoenix - Arizona 5 Yrs Experience Licensed in AZ, PA, UT Widener University Delaware Law School

My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, Tax, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the 2024 Super Lawyers Southwest Rising Stars list. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.