10 Tips to Renegotiate and Restructure Equipment Leases and Loans

If your business cash flow is tight and you need some breathing room, consider restructuring your equipment leases and loans. It is always possible to negotiate your existing equipment leasing contracts. The biggest reason leasing companies don't change contract terms is because they are never asked to make modifications. If you don't ask, you don't get.

Here are 10 tips to renegotiate your equipment leases and loans.

1. Call the leasing company if you are behind in making payments. Keep communication lines open.

2. Avoid late payment penalties. They can be as high as 10% of the lease payment. They add up quickly and are cumulative.

3. Negotiate late payment penalties if assessed. Sometimes leasing companies will forgive them if requested as long as paying late has not been standard practice during the entire lease term.

4. Be proactive, not reactive, in the restructure process. Have a plan. Make sure your financial statements and tax returns are ready to support your refinance request. Lenders will want to see your most recent year-end tax return and a current interim statement with comparative periods for the previous year's performance.

5. Discuss the possibility of restructuring the payments. Options may include lowering payments by adding months to the end of the finance term. Support the longer term with information regarding the equipment useful life.

6. Propose an interest only payment option for a few months to get through a tight cash flow period.

7. Deal with a leasing company manager or bank officer. The customer service person is instructed to say, "We do not restructure leases."

8. Know your contract options. This means read your current lease contract document cover to cover. If pages are missing, request that they are sent to you.

9. Understand what will put your lease into default. Often a default on one lease schedule means that all leases with the same financial institution will go into default too even though they are paid on time. Understand that a lease default will be very expensive.

10. Refinancing and restructures usually come with fees. The fee should be less than one-half percent of the total amount of the equipment acquisition cost.

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