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Renegotiating or modifying existing plant and machinery leasing terms is more common than you might think. Whatever the reason for making a change, the process can be quite complicated without the right help and guidance.
With the business landscape constantly shifting, it is essential that you regularly review your corporate financing options to work out if your current agreements work for you. Taking the time to monitor your agreements could save your company money further down the line and keep your operations flexible.
What is a Plant and Machinery Lease Agreement?
Before we explore the process of modifying plant and machinery leasing terms, we will first of all examine what the agreements are and why you may want to look into them.
A plant and machinery lease agreement is basically a rental arrangement that enables you to use the assets as though it was your own. Under the terms, you will be granted exclusive use of the item in return for a set fee over a designated period of time.
Provided the terms of the agreements are not breached in any way, your lease provider will not be able to take back possession of the asset until the full term has ended. There may even be an option for you to purchase the item outright further down the line if you so desire.
One of the main advantages of setting up a plant and machinery lease agreement is the fact that there is no need to tie up large amounts of your available capital into an asset that you may not need in the future or will depreciate in value.
Why Renegotiate Plant and Machinery Leasing Terms?
As your enterprise grows, or your circumstances change, there may come a time where your current plant and machinery lease agreement no longer works for you. For example, your company may be suffering from cash flow problems and need to lower your monthly payments or even terminate the agreement completely.
Other potential ways to amend terms include:
- Increasing or decreasing the scope of the lease to use more/less assets than the original agreement
- Extending or contracting the leasing period
- Returning the asset before the agreed term has ended
Whatever your reasons for wanting to renegotiate, it is a good idea to seek expert advice to ensure you receive the best possible outcome.
How to Renegotiate a Plant & Machinery Lease Agreement
If you are looking to renegotiate plant and machinery leasing agreements, there are a number of things you should consider before you get to the negotiating table. While they may not guarantee success, they will give you a better chance of getting the outcome that you need.
Go in with a Plan
Be sure to enter the negotiations with a clear idea of what you want to achieve and what you require to get there. If you lack a specific roadmap, then the lender may not be willing to accommodate your request as they simply will not understand your reasoning.
It may also be worth asking for a little more than you actually require, so that you come across as flexible during the negotiating period. Whether you are wanting a reduction in payments or a longer lease term, having a clear direction will allow you to remain in control of proceedings.
Back up Your Argument
Before you start the negotiating process, make sure you backup your request with hard data. If you are struggling with your payments because of cash flow, for example, you may want to provide evidence of this to the lender so they can appreciate your situation. In many cases, it may be advantageous for your lender to agree new terms for the lease, rather than risk you not being able to pay at all.
Another course of action you could take is to carry out some research into their current situation. You may be able to find some cause for compromise that would be beneficial for both parties.
However you decide to approach things, simply going in and asking for a reduction in payment amount with no reasoning is extremely unlikely to get you anywhere, as the lender will see no benefit to grant your request. You will need to give them a reason to do this and show them why renegotiating will benefit them as well.
Start Negotiating Early
Try not to leave the negotiating until the last minute. If you can see potential problems on the horizon, it would be a good idea to speak to the lender as early as possible and see if you can come to an agreement. Given that the discussions may take a while, starting them off when you are already in trouble could see things get even worse – especially if you do not get the result you were looking for.
Other potential times to start negotiations is on the anniversary of when you first made the agreement. This provides a good opportunity to carry out a thorough review of your situation and whether the asset fits into your current business model and if it is helping you reach your goals. You may find that you would be better off switching from a long-term arrangement to purchasing the item outright, for example.
Another potential opportunity is at a time of major upheaval at your company. Whether that involves reaching a predetermined business goal, a management shakeup or moving into new premises, rapid scaling or overhauls of your operations present an ideal time for you to review your existing arrangements and decide whether they reflect your new reality.
What Happens if Negotiations Fail?
As with most negotiations, it is a good idea to have a back up plan if you do not get the result you are looking for. Putting all of your eggs in one basket is extremely dangerous, especially if your company is struggling financially.
It is therefore a good idea to speak to a specialist business recovery advisor, who will be able to gain a thorough understanding of your circumstances and recommend other ways to turn your fortunes around.
Get Expert Help from Inquesta
If you are looking to renegotiate your existing plant and machinery leasing terms, or for any other commercial finance requirements, you can rely on Inquesta to provide expert assistance. We have amassed decades of experience in helping business owners like you make the most of their finances.
We understand that each enterprise has their own unique circumstances and goals. This is why we take the time to gain a thorough understanding of your company and requirements. Once we have built up a complete picture of your needs, we will use our network of preferred partners to connect you with leading advisors that will be best placed to assist.
For more information about how Inquesta can help you and your business, arrange a free consultation or contact our team today.