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Welcome to the CLFP Blog where CLFPs in Good Standing can submit discussions and news articles.
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  • Thu, May 02, 2013 12:16 AM | Reid Raykovich (Administrator)

    By Rosanne Wilson, CLP

    Do you believe you are at the top of your game?  It's springtime and memories are just waiting to be made!  It's a time for happy new beginnings.  It’s the perfect time for you to really achieve if you are willing to reach a higher potential.  Access to financing continues to be difficult for many small- and medium-sized businesses.  As a result, more and more businesses are turning to leasing companies.  I like to say these businesses are very smart to choose leasing.  But will they choose you?  What good reason would they have to choose you?  Is there anything about you that STANDS OUT, or are you in the shadows?  Most of the shadows of this life are caused by our standing in our own sunshine.  The only thing certain is uncertainty.

    The rest of your life is being shaped right now with the dreams you chase, the business you seek, the choices you make, and the person you decide to be.  Become a CLP and you will STAND OUT.  You will be able to market yourself as a cut above the rest of the pack.  Business owners will see that you have succeeded in achieving the highest level of knowledge in the industry as well as your commitment to the best business practices.  You can STAND OUT by displaying the most-coveted credential in our industry.  The CLP letters are on all my correspondence, emails, website, and marketing materials.  I make sure all my customers, vendors, and funding sources know that I am a CLP and therefore am truly committed to my profession.  I choose to STAND OUT and I hope you will, too.

    Small- and medium-sized companies are slowly beginning to reinvest in their business again with capital equipment purchases.  Our industry is seeing only moderate growth, but we are moving in the right direction.  If you STAND OUT, these companies will seek you out and find you.  CLP's are at the top of the list of people that small businesses trust.  Become a CLP.  Don't let fear dictate your life.  You probably know several CLP’s already.  If they can do it, you can, too!  If not now, when?  Instead of giving yourself reasons why you can't, give yourself reasons why you can.

    Sincerely,
    Rosanne M. Wilson, CLP
    President of the CLP Foundation

  • Thu, January 31, 2013 8:36 AM | Reid Raykovich (Administrator)

    By Barry Marks, Esq., CLP

    I ran across a funny cartoon a few years ago in which one businessman was holding a gun on the other. The caption read “I am now ready to negotiate.”

    In equipment finance negotiations, things are likely to run smoothly and the results to be favorable if the leasing company has all of the power, or if the lessee simply does not bother reading the documents. Unless one of these situations is true, however, negotiations are likely to require strategy and tactics. This article will review equipment finance negotiations in terms of general negotiating rules and advice for lawyers and their clients.

    ROLE ASSIGNMENT/GROUND RULES

    A lawyer I knew 30 years ago had a motto: “Lawyers talk to lawyers, businessmen to businessmen.” This was long the paradigm, but it has eroded in recent years, especially for middle-market transactions. Still, assigning roles at the outset of any negotiation is essential. A few suggestions:

    It is indeed best for the lawyers to stick to the legal issues and not waste time showing off by fussing over pure business points. Most experienced counsel know the difference, but it is up to the businessperson to identify the issues they will handle directly with the lessee. Do not let your lawyer make that decision unless you are sure they are experienced. If so, give them clear directions and parameters.

    Always decide how much time and money the negotiation is worth and let the lawyer know in advance. Do not be afraid to divulge your strong and weak points, giveaways, and key issues. If you do not trust your lawyer with this information, get another lawyer. If you think you will get a better deal by misleading your lawyer, find a new line of work.

    Remember: There is no “right” and “wrong” no matter how you yell about it at the table or over the phone. We are talking deals, not laws. “Market” is an amorphous concept at best. Some say negotiating is not about winning; this writer disagrees. It is about defining winning according to what the client needs and wants most and the cost effectiveness of obtaining those goals.

    STRATEGY

    Good negotiators know the difference between strategy and tactics. Strategy is similar to planning a military campaign. It is best done before negotiations commence and should only be changed when circumstances clearly dictate. In order to formulate a good strategy, it is essential to know one’s goals; in order to effect that strategy through good tactics, it is necessary to keep them in mind. Obviously, closing the deal on terms as close to those presented by the lessor is the major overall goal. Prioritizing the lessor’s needs, however, may be essential.

    For example, lessors relying on end-of-term residual value often find negotiations regarding the condition of equipment, place of return, and price of purchase options to be the difference between profit and loss. Lessors that are engaged in full-payout leasing, on the other hand, are often more concerned with assuring themselves the payment of all rentals, despite casualty or other circumstances that could interrupt rent flow.

    A necessary second step in developing a strategy is to attempt to identify the goals and priorities of the lessee. Determining points that are essential to lessees often results in successful tactics in proposing trades. It makes no sense to argue with a lessee over issues that the lessee must win to be satisfied with the transaction (except as a means of increasing the lessee’s willingness to give up other issues). If the must-haves between lessee and lessor match up badly, the negotiation may be doomed from the start.

    Another key is determining the relative power positions of the parties. What is the lessee’s (or lessor’s) sensitivity to timing? What are the lessee’s alternatives? How attractive is the competition or the option of paying cash? There are several ways to obtain this information, including approaching the vendor, checking past lessee transactions, and reviewing the RFP or RFQ, if any. The vendor is sometimes in a position to advise as to specific concerns the lessee may have and thus act as a somewhat benign spy in the entity camp.

    Finally, the lessor must try to guess how aggressive the lessee intends to be in the negotiations and whether to meet it head-on, take advantage of a weak negotiator and be aggressive, or patiently establish that the lessor is reasonable and “just wants a fair deal.”

    Tactics to be pursued should support the strategies adopted, but the lessor must always be prepared to change tactics if the situation requires.

    TACTICS

    The tactics to be used at the table should always be consistent, with the strategy set before any meeting or telephone negotiation. Tactics also often involve assembling information that might not routinely be introduced at any meeting.

    For example, does the party representing the lessee have sufficient authorization and power to make deals? This can be the first question asked at the table, but it is better to discuss this before the meeting to ensure that the meeting does not begin with embarrassing the other side. Negotiating with a party that does not have authority should be avoided, as such a party can only take, but never make, significant concessions.

    In equipment finance terms, this could be somewhat more complicated than it may appear. Even a senior vice president who appears to have authority may defer to someone from treasury or feel the need to call in a senior officer prior to making a final decision. Putting too many facts and options on the table too early can result in empowering an otherwise weak negotiating partner. This is not to say that information should not be revealed or that candor and openness are not advisable. The information to be released, however, should be carefully screened and the release timed.

    Lessors often find it useful to begin with points that are important to the lessee and dig in, indicating a willingness to compromise but identifying them as important to both parties. To the extent it is possible to hold off on the most serious lessor concerns until the lessee is somewhat disheartened by the early negotiations, the lessor may find that the lessee is relieved to find the lessor willing to trade for points it actually needs to win.

    It is important, however, never to leave the biggest issues until last, conceding or compromising on points important to the lessee and then having nothing to trade. If it is possible to do the reverse and address lessor issues first AND resolve those issues, gains can be made in favorable compromises when the lessee’s back is to the wall.

    Other tactics are matters of style. Some negotiators prefer to dig in on whatever issues arise first, even if they are minor ones. This sets the tone of a tough fight and shows seriousness on the lessor’s part. Later concessions and compromises are more appreciated.

    Where the lessee presents an aggressive draft or comments on the lessor’s document, starting with a point the lessor knows it will win is a good idea, embarrassing the lessee if the lessee tries to fight. For example, lessee counsel arguing over the hell-or-high-water clause or warranty disclaimer can be reminded gently but firmly that the lease replaces bank financing: if the equipment does not work, the bank is not going to allow set-off against its note.

    On the other hand, sometimes the better tactic is to begin with minor concessions or compromise proposals that make sense for both parties. This can defuse a potentially rancorous negotiation. For example, where lessee counsel balks at the breadth of the general indemnity, allowing an exception for gross negligence or willful misconduct by the lessor may be a good way to cool down the negotiations. Similarly, contest rights for tax indemnities, “reasonable” attorneys’ fees and such may be given from the standpoint of trying to be reasonable and get a deal done, while focusing on what one client calls “giving the sleeves from my vest.”

    A similar tactic is to solicit questions from the other side as to what the lessor may be able to offer in the way of options and how the lessor may be able to assist the lessee in framing the lessee’s own priorities. This will both reveal the lessee’s particular needs and place the lessor in an advisory position as well as that of an adversary. For example, a lessee concerned about security issues will welcome advance notice of inspections.

    This strategy leads to the concept of making an offer that is educational and informative as well as competitive. For example, noting that the lessee in its earlier or most recent communication evinces a need for early termination might result in offering an early buyout option as an alternative to the traditional termination with a substantial penalty. By explaining the difference between the classic early termination, requiring the customer to locate a new buyer and cover any shortfall, and a buyout option that permits the customer to purchase the equipment and then sell it at its leisure, may at once relieve the lessor’s anxiety over complications in the termination process, maximizing predictability and posturing the lessor as a “problem solver” or “financing partner.”

    Revealing information regarding the lessor’s own priorities may elicit information from the lessee at low cost. For example, acknowledging that the lessor does not wish to have the equipment back and be required to remarket it if there is a profitable alternative can lead the lessee to reveal its long-term intentions for the equipment. Obviously, this can backfire.

    Other tactics are designed to avoid the breakdown of negotiations. These include:

    Asking provocative questions, such as “Under what circumstances would you consider….?” This often catches business negotiators short as they begin to assemble their wish list for trade items.

    Another possibility is to have in mind back-up positions that can be offered in the event there are language problems.

    Experienced counsel may also be able to agree in concept to points that can be drafted favorably without going back on the original deal. By conceding or compromising generally but keeping the drafting duties, good counsel can win back some of what is lost.

    One interesting variation is to stress to the lessee terms it will understand such as “total cost of ownership.” As many companies are advised by consultants and senior management to focus on these concepts, a provider who approaches from the same avenue may find the going easier. In leasing terms, “total cost of ownership” would include the cost of maintenance, taxes, the time value of money, the cost of dedicated personnel, and the dollar value to the availability of upgrades, and other possibly available options. Looking at the lessor’s strategy and priorities from the lessee’s perspective may result in finding that a lessor is in a position to assist in covering some soft costs by financing them; reducing taxes or other expenses through structuring; changing the site of delivery; or possibly adding other actions, such as preparing property taxes to relieve lessee costs and gain competitive advantage over other leasing companies.

    Where there is a particular person who is causing the lessor headaches by being aggressive (often lessee counsel), there are tactics to marginalize this person within the framework of the lessor’s strategy. If the lessor has adopted a soft approach, it is possible to use humor or a well-placed sigh to make the aggressive negotiator seem an impediment to closing, and actually acting against the lessee’s best interests. Throwing a few reasonable compromises at someone who is unwilling to compromise can paint the troublemaker in a bad light with his clients or bosses.

    For example, where the lessee’s negotiator is insisting on no return obligations, the lessor might throw out several compromises: Deliver within an agreed mileage? Pay the cost and the lessor will arrange redelivery and take the risk of the return? Share the cost and continue the insurance? Agree to pay a preset delivery charge and avoid cost increases? If nothing works, explaining that the rate will be affected by the anticipated residual value and that the residual value is affected by return costs may seem logical. Noting that the lessee can control disconnection, packing, and return if it agrees to standard language, rather than having the lessor’s representatives come on site and disrupt operations, may impress the negotiator’ superiors. (Remember always to have the actual decision maker present.)

    The reverse may also be true if the aggressive negotiator is simply not experienced, smart, or “good” enough to back his aggression with good ideas. Meeting such a person head-on with better logic may stop a bully the old-fashioned way: by punching him in the nose. Depending on the lessor’s faith in its own or its counsel’s abilities at the table, this may be the most cost-effective way to proceed.

    Conclusion

    As any experienced businessperson knows, lawyer-to-lawyer communication is often an expensive proposition, but it is also often the fastest way to resolve issues. The key is to manage the roles of lawyer and lessor so as to hold down costs while moving the deal to a favorable close.

    Before signing off (being a truthful and ethical CLP), I must warn the reader that for all this planning and 37 years of experience, I do not believe I ever won an argument with any of my children. I have no idea how my 5-year-old son got to be such a skilled verbal sparring partner (yes, he probably inherited it from his mother), but I hope he manages to hang on to the skills long enough to get me into a choice retirement home at half price.

    BARRY S. MARKS

    Marks & Weinberg, P.C.
    www.leaselawyer.com
    barry@leaselawyer.com

    Barry S. Marks has concentrated his practice in the areas of equipment leasing and commercial lending and finance since 1977 and is a Certified Lease Professional (CLP).

    Legal Publications Author - Chapters in Matthew Bender’s Equipment Leasing and the Practicing Law Institute’s Equipment Leasing - Leveraged Leasing treatises. Co-Author - Power Tools for Successful Leasing; Technology Leasing: A Lessee Toolkit; and Power Tools for Small Ticket Leasing (all from Leasing Power Tools Press (www.leasingpress.com) and on Amazon.com).

    Professional Honors & Activities Listed in The Best Lawyers in America® since 2005; Best Lawyers in Alabama and Alabama Super Lawyers; Director Emeritus, National Association of Equipment Leasing Brokers; Boards of Editors, Journal of Equipment Lease and Financing and LJN (formerly Leader’s) Equipment Leasing Newsletter; Past Member, Legal Committee of the Equipment Leasing and Finance Association; Bill Granieri Award for Education in Equipment Leasing (1999); Member, Alabama State Bar, The Florida Bar, and State Bar of Georgia. Certified Lease Professional (CLP).

    Education Emory University, B.A., 1974, magna cum laude; University of Florida, J.D., 1976, with high honors; Emory University, LLM. (Taxation), 1985.

    Personal When he is not working, Barry finds time to write poetry and the occasional short story. He is a past president of the Alabama State Poetry Society and was Alabama’s Poet of the Year in 1999. Barry has published two books of poetry: Possible Crocodiles is available at www.brickroadpoetrypress.com and Sounding, poems dealing with grief and survival, is available at http://negativecapabilitypress.squarespace.com. Both are on Amazon.com.


  • Thu, November 01, 2012 12:40 PM | Reid Raykovich (Administrator)

    An Interview with Dwight Galloway, CLP, of RLC Funding

    When did you become a CLP?

    I became a CLP while a member of the WAEL Board just as we were changing to UAEL in the mid-90’s.

    You joined Navitas Lease Corp. last year. How did that relationship come about?

    Gary Shivers and his highly experienced team started Navitas several years ago as a small-ticket lessor primarily in the office equipment industry. They are vendor-driven and have well-established partnerships in the industries they serve. He felt that our team, which has been a premier broker funding source since the 80’s as Republic Leasing and then NetBank Business Finance, would be ideal as a separate, stand-alone origination platform funding broker/lessors. I am rehiring our core managers and expert employees, most of whom have been a part of our team here in Columbia, South Carolina, since the 90’s and some even since the 80’s!

    How is RLC operating?

    RLC is operating with the same people, standards, policies and procedures that our team developed during our decades as a national funding source for brokers, lessors and discounters. We only accept business from experienced broker/lessors whether the transaction is brokered to us on our documents, or assigned to us by the lessor (before or after the vendors have been paid). We do not have minimum volume requirements but ask that our sources be professional and send us the business we can do. We own, hold and service the leases and finance agreements here in our office – always remembering that the broker/lessor is our customer and that the vendor and lessee are customers of the broker.

    What markets are you attempting to serve?

    We work with brokers/lessors nationwide but we work best with those that have some particular areas of concentration in which they have become an expert. Although we certainly accept “one-off” applications from generalists, we prefer using our great experience to assist brokers in developing programs to fit their unique industry or vendor needs. With a deep knowledge of many industries developed over 25 years and billions of dollars of broker fundings, we can often help our broker/lessors exploit opportunities in unique markets or with unusual vendors.

    What products do you offer?

    RLC is a credit-based, not asset-based, lender! We approve “B+” to “A” credits with application-only to $75,000 and up to $150,000 with financials. Although it would be nice to have good collateral, we ignore the value or lack thereof in making our credit decisions. Our highly trained analysts apply flexible credit parameters to credits with particular attention to time in business, the applicant’s industry and the history of handling business and personal debt as agreed.

    How do you want your broker/lessor customers to perceive RLC Funding?

    Experience, flexibility, consistency, common sense and integrity.

  • Wed, August 01, 2012 11:42 AM | Reid Raykovich (Administrator)

    By Joe Schmitz, CLP

    As lessors, lenders and brokers we’re constantly looking at an individual’s credit bureau to evaluate requests for commercial lease and financing. The use of credit scores is a common way to help establish eligibility. But do we really know what goes into the making of that score?

    There are a variety of credit score modules for personal credit. The most commonly provided one is from the Fair Issac Company. Their scoring model is called FICO with Experian, Empirica with Transunion and Beacon with Equifax. Because different account holders report to different credit agencies, there are generally variations between the credit scores on the same individual. Credit scores range from 300 – 850 and the higher the number is the better.

    A credit score is a number that summarizes an individual’s credit risk based on a snapshot of their credit profile at a particular time. Fair Isaac inputs thousands of data points into a statistical model to create that scoring number. The actual formula used to determine an individual’s scoring number is a closely guarded secret, but Fair Isaac does provide a broad brushstroke of the elements entailed in the score.

    First, what is in the credit report? These are the major items that all credit reports have.

    • Personal information such as name, address, social security number, and date of birth.
    • Accounts Summary, which details the specifics of each credit item listed in an individual’s credit file.
    • Inquiries, when companies review an individual’s credit information. 
    • Negative items, including delinquencies such as late payments, charge offs and collection accounts, and public records such as tax liens bankruptcies, legal suits, etc.

    Fair Isaac enters all of these items into a formula to determine a person’s score. Here is how Fair Issac weighs the various items:

    Payment history 35%
    Amounts owed 30%
    Length of credit history 15%
    New credit 10%
    Mix of credit types 10%
    Source: www.myfico.com

    A credit score takes into consideration all of these factors, not just one or two. Everyone’s mix is slightly unique which is why scores vary for different individuals. Some things however, do not affect a credit score. These include race, religion, gender, marital status, age, income, and employment.

    Credit scores are not the only criteria that a lessor or lender will use when making a credit evaluation. Also, different funding sources have varying credit windows for the transactions they fund and will consider different scores from the guarantors based on the funding source’s criteria. Knowing the score is important but understanding the details of the credit bureau as it relates to the funding source’s credit appetite is equally important.

    How to improve credit scores. Many individuals are confused about their scores and how to improve them. This is complicated by companies that advertise quick fixes to improve credit scores. According to Fair Isaac, this is not the way to repair your credit and can often boomerang on the guarantor and make their credit profile worse as it appears to be “cleaned.” This makes funding sources suspicious of the information on the report. The way this occurs is that negative items on the credit bureau are formally disputed through Fair Isaac. If the account holder with the negative item does not respond in a specified period of time, that item is removed. The difficulty is that removed items often create a mismatched report that isn’t consistent and may be considered with suspicion by the lender.

    Here is the correct way for someone to improve their credit scores in order of importance:

    • Pay your bills on time.
    • Get current and stay current.
    • Keep balances low on credit cards and other revolving credit.
    • Pay off debt rather than move it around.
    • Don’t close multiple unused credit cards or open multiple new cards as a strategy for increasing your score.

    Having good credit is a process. It takes time to build and requires proper management. Credit is a great servant but a horrible master.

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