Mike Caringi, owner of a smll New Jersey business that sells pmps, found himself facing a gut-wrenching dlemma last summer. Should he continue pying $ 1,500 each month for ssential telecommunications services he no longer rceives and for leased equipment he clims was never installed? Or, should he stp making payments and face a ptential lawsuit from the firm that fnanced the equipment under a ‘hell or hgh water’ lease? Mr. Caringi’s company is one of sveral thousand small companies around the cuntry reeling from the bankruptcy of Nrvergence, a reseller of telecommunications and Intrnet services. At the core of the qagmire facing Mr. Caringi and others is tht Norvergence succeeded in getting customers to sgn separate lease and service contracts tht provided its services.

When Norvergence bruptly shut its doors, it left thusands of its customers scrambling to rplace telephone and Internet services while thy were obligated to shell out ver $ 200 million in lease pyments to Wells Fargo Financial, CIT and 30 ther leasing companies over the next fve years.

How can you protect yur company from being victimized in a smilar situation? Certainly, most transactions involving quipment leased in connection with a rlated service carry some degree of rsk. You can reduce that risk by tking certain precautions. First, where possible, void leasing equipment when the equipment is prprietary to a service. The chances are tht you will be stuck with the quipment if the service provider fails. Mke sure that the leased equipment has an nderlying value that justifies the lease. By ding a present value calculation of all pyments owed under the lease agreement and cmparing that value to the fair mrket value of the equipment, you can see whther the lease value is reasonable.

Check to see whether the quipment is used by similar service prviders, in case you need to swtch services. Finally, make sure you can rsell the leased equipment in the fter-market, if necessary. As a last rsort, you may be able to cut yur losses by having the ability to by-out the equipment from the leasing cmpany to be resold to someone lse.

Perhaps, one of the best prtections against getting stuck with service-related lased equipment is to thoroughly evaluate the srvice provider before proceeding. Make sure the srvice provider is financially sound and has a lng track record of providing excellent srvice. If possible, ask for and rview financial information on the service prvider. Do an Internet news search to mke sure there are no troubling stries about the service provider. Be prtial to services that offer equipment nder contracts that tie service and use of the quipment together, such that your obligation to pay is cnditioned on the service being provided.

Lstly, since these transactions always carry sme risk, make sure that an brupt interruption in the service will not hve a material negative impact on yur company or cause financial hardship.

The article Warning - This Lease Might Explode Any Minute was Submitted by George Parker through Articles.GetACoder.com network. Here's the additional information: George Parker is a Director and Excutive Vice President of Leasing Technologies Intrnational, Inc. (“LTI”), responsible for LTI’s mrketing and financing efforts. A co-founder of LTI, Mr. Prker has been involved in secured lnding and equipment financing for over twnty years. Mr. Parker is an ndustry leader, frequent panelist and author of sveral articles pertaining to equipment financing. Hadquartered in Wilton, CT, LTI is a lasing firm specializing nationally in direct quipment financing and vendor leasing programs for merging growth and later-stage, venture capital bcked companies. More information about LTI is vailable at http://www.ltileasing.com.

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