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Business Management

April 13, 2020

Leasing Strategies to Improve Financial Stability During the COVID-19 Pandemic

By Nick Baxter, CLFP

The COVID-19 pandemic has underscored the importance of being prepared to withstand an unpredictable business environment. Consider the leasing strategies below to position your firm for financial stability and flexibility to navigate the uncertain times ahead.

Cash Reimbursement (Sale-and-Leaseback)

Amidst economic volatility, having cash on hand may be more important than ever. Equipment and soft costs purchased within the last 6-12 months can be monetized to provide short-term budget relief through a cash reimbursement.

Benefits for Firms:

  • Improve short-term liquidity
  • Preserve cash or other lines of credit
  • Take advantage of historically low rates
  • Spread cost of asset over its useful life
  • Diversify funding sources

Considering your equipment as an additional source of liquidity is a quick and easy way for firms to increase cash on hand. A reimbursement will replenish your cash for 100% of a completed project’s costs, enabling you to remain nimble and reinvest in your operations as needed.

Lease Line of Credit

With your capital budget in flux, you can guard against market fluctuation by locking in today’s low rates on a lease line of credit. A lease line gives you the freedom to use as much or as little as you need, with no under-utilization fees. You can use it to cover any equipment, service, software, or long-term capital projects you have planned over the next year.

How A/E Firms Use Lease Lines:

  • Technology – computers, servers, copiers, phone systems, plotters, survey/geospatial equipment, LIDAR
  • Office Buildouts – FF&E, A/V, cabling, lighting, leaseholds, MEP, construction and design fees
  • Soft Costs - AutoCAD and Microsoft licensing, Deltek and BST upgrades, professional liability insurance

Flexible Payments

When looking to work with a leasing company, make sure they understand your firm’s objectives and will customize a payment structure aligned to your needs. A deferred payment option, for example, allows you to implement new equipment or projects immediately, generate revenue from those investments, and pay later.

Amid periods of financial volatility, sound leasing strategies can help your firm weather the storm. Whether you need short-term budget relief or want to position your firm for long-term stability, your leasing vendor can help you identify and implement the right financial solution.

Nick Baxter is Vice President of the Professional Services division at First American Equipment Finance.


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