How Equipment Leasing Began

Although no one knows when equipment leasing first began, archeological evidence suggests it has been around for at least four millennia. The evidence also closely ties equipment leasing’s origin to early agricultural development. Archeologists uncovered some of the first tangible signs of personal property leasing in the ruins of Ur, an ancient Sumerian city (in ancient Iraq). Clay tablets discovered by archeologists indicate that around 2000 B.C., Sumerian priests leased farm implements, land, water rights, and livestock to farmers.

Apparently, leasing was also used by the Babylonians in the fertile valley between the Tigris and Euphrates rivers. Ancient Babylonian kingdoms authorized farmers to lease farm equipment, oxen and land. Archeological finds reveal the importance of leasing to the most prominent Babylonian king, Hammurabi, who codified leasing regulations during his rule (around 1750 B.C.).

Around 450 B.C., just south of Babylon, the wealthy Murashu family started a bank and leasing house that helped Persian farmers acquire land and farm equipment. Their firm became one of the best known financial services providers to Persian farmers and land holders at the time.

In other ancient civilizations, leasing proved viable for acquiring the tools, land, and livestock to support agricultural pursuits. There are indications that the ancient Egyptians, Greeks, and Romans employed leasing for this purpose.

In addition to its role in advancing agriculture during ancient times, leasing played a significant role in sea transportation and military endeavors. The ancient Phoenicians, known for their prowess and expertise in shipping and trade, employed ship charters that bear close resemblance to the modern lease. Many short-term charters that conveyed the use of ships and their crews resembled the operating leases used today. Some long-term charters were written for periods covering the estimated economic life of the vessels. These contracts often conveyed the use, benefits, and obligations associated with ship ownership. In many cases, these arrangements presented some of the same negotiating issues that face modern day lessees and lease providers.

Several important military campaigns illustrate the early military uses of equipment leasing. For example, the Norwegians and Normans used forms of lease financing to secure the ships, equipment and crews necessary to launched their invasion of England in 1066 A.D. During a later period, knights leased their armor for battle. In 1248, Bonfils Manganella of Gaeta leased a suit of armor used during the Seventh Crusade, paying a rental that was close to 25% of the armor’s original value.

For centuries, personal property leasing was not recognized in England under their common law. As a result of the rising popularity of equipment leasing, personal property leasing regulations were included in the Statute of Wales of 1284. Over time, a few Englishmen began to use leasing as a means to secretly acquire property — with the intent of defrauding creditors. At the time, many creditors based their credit decisions on the value of property in the borrowers’ possession. In 1571, England passed an act that prohibited such fraudulent property transfers while preserving the ability to use leasing for legitimate purposes and for reasonable consideration.

By the early 1800s, both the amount and variety of equipment being leased in the United Kingdom had increased. The expansion of agriculture, manufacturing and transportation led to more widespread use of this form of financing. In particular, the expansion of railroads accelerated equipment leasing’s growth. Many early railroad companies struggled financially to construct their tracks, relying on tolls for track use to generate income. This development presented an opportunity for enterprising entrepreneurs to separately acquire and lease railcars to the rail companies and independent shippers.

Equipment leasing continued to play an important role in England and other parts of Europe as the agricultural, manufacturing and transportation industries expanded. It also began to take root in the U.S. as these same industries grew. Although the first equipment leasing transactions in the U.S. involved horses, buggies, and wagons, leasing also gained popularity with the expansion of U.S. railroads. As the rail companies expanded and equipment leasing began to branch out into the manufacturing segments, the U.S. started its transition into the modern era of leasing.

George Parker is a twenty-five year industry leader, co-founder and Executive Vice President of Leasing Technologies International, Inc. (“LTI”). He is author of several articles and e-books, including “Using Venture Leasing As A Competitive Weapon” and “101 Equipment Leasing Tips”.

The Merits Of Used Farm Machinery

A common but mistaken perception with regards to used farm machinery is that they are those dilapidated and often unusable acquisitions. That’s why farmers tend to purchase brand new items that may cost twice as much when compared to used equipment.

But if that is the case, how else would you explain the rapid expansion of agricultural endeavors worldwide? Australia alone ranked as the 20th country in the world with regards to the number of tractors in 2003. That’s just tractors. The demand for these will definitely increase as the years go by.

Dispelling Incorrect Notions

The first incorrect notion about used farm machinery is that they are unserviceable and therefore unusable. If that’s the case, why else would anybody want to sell them? Although there’s a semblance of truth in that the workload and other environmental factors like constant exposure to sunlight, dust, water and earth may significantly affect the performance of these machines, the ones that are brought out in the pre-owned market are usually well-maintained. Furthermore, some of these used equipments are the ones that have been affected by the recent credit crunch.

Consider the economic conditions prior to the economic crisis of 2010. A farmer with substantial means was able to procure, let’s say, a farm tractor to increase his farm’s output. Now, when the economic crisis came, he was forced to let go of the tractor even though the balance was not fully paid. It’s highly likely that he wasn’t able to use the tractor for more than two seasons of farming. In such case, one can say that the farm tractor is still in prime condition.

Of course, not all situations are like that. But given the prohibitive nature of brand new farm equipment, it’s possible that such scenarios are pretty common in the post recession agricultural economy.

second-hand Farm Machinery are Expensive

That’s the second incorrect notion. Like automobiles and other mechanical equipment, their value depreciates on a regular basis. This principle is often used in standard accounting procedures and reflects the nature of farm machines as mechanical objects.

As time passes by, equipment can only get cheaper and cheaper.

No Financing is Available

The last incorrect notion that must be corrected is that there is no financing available for used farm machinery. On the contrary, notable companies such as John Deere or second-hand farm machinery, provide flexible financing options to farmers. Aside from that, many financial institutions realize the potential of agriculture in a world that’s increasingly becoming interconnected. It believes in investing in farmers in order to increase food production.

In fact, several financing options are made available even online. This lets you choose which solution fits you best. Three financing options are available when it comes to John Deere, and they all take account of the difference in requirements for each and every businessman. Among the options available are Direct Pay-Recurring, Direct Pay-One Time and Pay by Mail. The wide choices available are custom-made for the requirements of the cost conscious agricultural entrepreneur.

Use Forestry and Agricultural Equipment Financing to Boost Productivity

Agriculture and forestry are two industries which:

1. Employ a large number of people
2. Fulfill almost all our essential requirements.

For the welfare of whole of mankind, it is essential that these two industries function efficiently. Efficiency is closely linked to the use of the latest technology, machines and other heavy equipment. Improvement in efficiency does not come cheap.

Forestry and agricultural equipment financing is the best way to overcome the problem of lack of money.

Use of heavy duty equipment is not unheard of in agriculture and forestry. Hectares of wheat cannot be reaped overnight unless tractors, reapers and other proper machinery are used.

A few strong men may cut a tree very quickly but lifting and transporting the tree over long distances is best left to cranes and trucks. Heavy machinery and equipment is essential for agriculture and forestry. That is the reason why forestry and agricultural equipment financing is considered so important.

Parameters Which Determine Requirements

One cannot adopt a ‘one size fits all’ approach with respect to farm equipment. The requirement of machinery depends on:

o The type of industry
o The function it serves
o The scale of operations
o The capacity of the individual enterprise

Modern Agricultural practices require equipment like:

a) Grain Harvesters
b) Grain Threshers
c) Cleaners.
d) Hay bailers
e) Tractors
f) Power Tillers
g) Ploughing equipment
h) Planting equipment

The use of equipment contributes a lot to the overall efficiency of agriculture. Unless genuine sources of forestry and agricultural equipment financing exist, high efficiency and high productivity would remain fancy words devoid of real import.

On the other hand, landscape companies, although dealing with land and plants, require a completely different set of equipments. These companies need:

- Large mowing equipment
- Edging equipment
- Mulching equipment
- Turf maintenance equipment, irrigation system like sprinkler system, drip system and so
on.

Agricultural and Forestry enterprises may also need to invest in specialized equipments like automated milking machines, food processing equipment etc to come up with newer ways to boost productivity.

Agricultural and Forestry enterprises may also need to invest in specialized equipments like automated milking machines, food processing equipment etc to come up with newer ways to boost productivity.

How To Get The Best Deal?

When seeking agricultural and forestry equipment financing, do keep in mind the following points:

1. No one will lend money to you unless the lender is assured of your ability to repay. Hence, be prepared for filling forms, completing formalities and submitting documents.
2. Do not expect huge loans to be cleared overnight. These transactions do take a bit of time. Keep this in mind when making your plans. Do not forget to provide time to deal with loan related formalities and contingencies.
3. Make sure you fulfill the minimum qualifications to be entitled for a loan before you apply for the same.
4. Search around for the best deal. A loan that charges the lowest rate of interest will help you save a lot of money in the long run.
5. In your quest to get the best deal, do not end up dealing with fraudulent financing companies. Deal only with genuine financing companies.