Leases & Leasing Information


Getting Your Venture Lease Approved


Each year venture capitalists fund more than 2,500 start-up companies in the U.S. Many of these companies try to conserve their equity capital by approaching venture-leasing firms to secure equipment financing. By obtaining lease financing, these savvy firms are able to use their equity capital for high-impact activities like recruiting key personnel, product development, and expanding their marketing efforts.

What are the qualities that make some start-ups more attractive than others to venture lessors? Here are ten factors that most venture lessors evaluate to decide which start-ups to finance:

Caliber of the Management Team

Most venture lessors consider the start-up's management team to be the most critical success factor for the venture. Though it can be challenging to quickly evaluate management talent, there are several qualities that venture lessors consider. They look for experienced managers with high integrity and a proven history of business performance.

Quality of the Venture Capital Sponsors

Another important factor for most venture lessors is the quality of the start-up's venture capital sponsors. Venture lessors look for experienced venture capitalists with successful investment performance over a number of years. The venture capitalists should also have good reputations for dealing fairly with creditors serving their portfolio companies. Before entering new lease arrangements, most venture lessors verify that the start-ups' venture capital sponsors are actively supporting them.

Soundness of the Business Plan

Successful start-ups usually have compelling, well-articulated business plans. Lessors look for signs that the start-ups have promising market opportunities, clear and credible projections, and reliable financial statements.

Cash Position /Monthly Burn Rate

A yardstick used by many venture lessors to measure risk is the start-up's projected cash consumption rate. The ratio of available cash to the start-up's monthly burn rate is a useful measure. It crudely determines how long the start-up can last before a new equity round is needed. The lessor views a transaction as less risky if the start-up can make full payments during a significant portion of the lease term without raising additional equity. Most lessors look for a ratio that supports at least 9 - 12 months of the start-up's operation.

Equipment Quality

The quality and intended use of the equipment is an important factor for most venture lessors. Most lessors look for transactions involving equipment that is essential to the start-up's operation. Additionally, the equipment should have acceptable collateral value and be readily re-marketable in the equipment aftermarket.

Product Prospects and Revenue Track Record

If the start-up is in the development stage and has yet to sell products, venture lessors generally look for products capable of establishing a strong market position. If the start-up's product is already in distribution, lessors look for strong monthly or quarterly revenue growth. A poor reception of the product in the early stages, when measured against the business plan, can often signal a faulty product launch or faulty product concept.

Valuation History

A valuation history records the share prices of stock sold to investors by the start-up. Unless there is a good explanation, most lessors look for significant share price appreciation over successive offering rounds. The assumption is that the start-up is making steady and significant progress in its development, which will be reflected in rising share values.

Balance Sheet Strength

Venture lessors usually evaluate a start-up's working capital to ensure that the start-up can make payments when due. Along with an analysis of the start-up's burn rate, lessors use traditional working capital measures like the current and quick ratios. Lessors also look for other signs of balance sheet strength, such as: low to moderate leverage; positive tangible net worth (inclusive of subordinated debt); and minimum paid-in capital of $7 - $10 million.

Outside Professional Involvement

Most venture lessors view the involvement of reputable and successful outside board members as a positive factor for start-ups. A reputable CPA firm, law firm, institutional partners and/or service providers are also viewed by lessors as positive. These professionals can bring valuable expertise and contacts that can help the new venture to succeed.

Payment Performance

As with more traditional lessees, venture-leasing companies frown upon poor lessee payment histories. Most venture lessors expect lessees to have satisfactory payment histories, unless good explanations can be offered. Like other vendors, satisfactory payment of bills by customers is where the rubber meets the road. Whether the lessee is a start-up or a Fortune 500 company, most lessors view prompt payment as sacrosanct.

While venture lessors use additional factors to make their credit decisions, these ten factors seem to be used universally. Though most of these factors are subjective, they have stood the test of time for venture lessors in making informed and reasonable credit decisions.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. ("LTI"), responsible for LTI's marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: http://www.ltileasing.com.


MORE RESOURCES:
This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news


The East African (press release) (blog)

Uganda takes to the skies with 'unwanted' Airbus
The East African (press release) (blog)
“Leases available for short-term durations are 'wet leases' (leasing both the aircraft and crew), which are very expensive, with structures involving extensive 'return condition' provisions,” the project team said, adding that dry aircraft leases tend ...

and more »


Club Industry

Financing Options for Fitness Studio Owners in Today's Market
Club Industry
Capital Leases – Leasing Equipment to Own. The most common financing option for fitness equipment is a capital lease. The main purpose of a capital lease is to finance the equipment purchase while preserving the owner's working capital. Fitness studio ...

and more »


Malaysia: Leasing - A Guide To Leasing In Labuan
Mondaq News Alerts
Over the years, Labuan International Business and Financial Centre's (Labuan IBFC) leasing sector has grown in tandem with the region's economic growth, as demand for capital equipment has showed no sign of abating in order to meet the demands of a ...



Australia: Leasing update - recent and potential future challenges for landlords
Mondaq News Alerts
IN BRIEF - RETAIL LANDLORDS SHOULD CONTINUE TO BE MINDFUL OF RECENT CHANGES TO NSW RETAIL LEGISLATION AND ALL LANDLORDS GENERALLY WILL NEED TO BE AWARE OF UPCOMING REFORMS IN INSOLVENCY LAW.

and more »


WyoFile

Mead unfazed by Zinke's sage grouse plan
WyoFile
As the BLM and Forest Service look to revise, and some say weaken, federal plans to protect grouse, Zinke continues to offer more energy leases. Leasing plans this year have provoked pushback and protests, including charges that the 2015 protections ...



blogs.hbr.org (blog)

Is Rooftop Solar Finally Good Enough to Disrupt the Grid?
blogs.hbr.org (blog)
They are offered either solar leases (leasing the panel and its energy for a fixed periodic payment) from a solar company, power purchase agreements (they purchase each unit of electricity produced by the panel at an agreed upon rate), or solar loans ...

and more »


United States: Leasing Tips For Commercial Landlords And Tenants: Who Owns The "Fixtures" When The Lease ...
Mondaq News Alerts
When a lease expires, it is not uncommon for landlords and tenants to dispute what constitutes the landlord's property and what constitutes the tenant's property, even when sophisticated parties and equally sophisticated leases are involved. Ownership ...

and more »


Weingarten Realty Investors' (WRI) CEO Drew Alexander on Q4 2017 Results - Earnings Call Transcript
Seeking Alpha
Weingarten Realty Investors (NYSE:WRI) Q1 2018 Earnings Conference Call April 25, 2018 11:00 AM ET. Executives. Michelle Wiggs - VP IR. Drew Alexander - President and CEO. Steve Richter - EVP and CFO. Johnny Hendrix - EVP and COO. Analysts.

and more »


TIME

Used Car Prices Are Plummeting. Here's Why
TIME
All of those new vehicle purchases and leases have translated to a parallel rise in trade-ins and cars coming off leases. “Leasing has surged in recent years with thousands of those cars coming back to dealerships as used cars,” Michelle Krebs, ...

and more »


witf.org

Judge strikes down borough's ban on renting to felons
witf.org
(Ebensburg) -- A Cambria County judge has overturned one borough's prohibition against renting to drug felons because it's pre-empted by state parole and leasing laws. Judge Tamara Bernstein issued the ruling Thursday, more than four months after Darcy ...

and more »

Google News

home | site map
© 2007