Spring 2020 Issue
"Linklease stays close to the customer during the lease period… and even closer to the equipment. Every item is RFIDtagged, and movable equipment is GPStracked, often with immobilisers or systems that require codes in order to function." Bespoke
Deep asset due diligence required including useful life and global resale markets
Avoid: usually unsuitable for leasing due to concentration and exposure
Generic
Suitable for leasing, due diligence is around resaleability and client cashflow value
Deep client due diligence to understand sensitivity analysis
Low Value
High Value
Table 1: Commodity scale
equipment they sell, and the market — but are less keen to provide longer credit terms to clients. Linklease neatly pulls these strands together, creating a unique market position. The “secret sauce” of leasing in the UAE is not difficult to work out, but in practice it can be tricky. DUE DILIGENCE It is crucial to have a blend of client due diligence approaches and an in-depth knowledge of equipment and its resale value, where in the world it can be resold, and its depreciation profile. Assets fit onto a sliding commodity scale, at one end very generic (forklift truck, office laser printer) where value and useful life are established. At the other end, the equipment is either bespoke or custom, and resale is uncertain. Leasing prefers more generic equipment for this reason. Asset value, blended with its commodity nature, gives an indication of what due diligence is needed. Generic low-value equipment requires a lighter due diligence in order to turn an equipment sale around. Some basic criteria can be pre-agreed and offered through distributors. This is an attractive option for leasing companies. Generic high-value equipment requires a greater depth of client due diligence to ensure capability to service the instalments. It is also attractive to leasing companies Bespoke low-value equipment is less attractive and requires deep asset due diligence to CFI.co | Capital Finance International
understand its resale value. If it is too specialised or limited, it isn’t a natural fit for leasing. Bespoke high-value, or custom-built equipment, has limited or no resale value. This is an “avoid” area for leasing. MANAGING THE PORTFOLIO Linklease stays close to the customer during the lease period… and even closer to the equipment. Every item is RFID-tagged, and movable equipment is GPS-tracked, often with immobilisers or systems that require codes in order to function. Every quarter, a company asset manager visits clients to check equipment is being correctly operated and that the lease is running smoothly. RECOVERING THE ASSET The most important job in leasing is to recover the monthly instalments and settle the amount outstanding at the conclusion of the lease. Specialist knowledge and skill-sets are needed in the area of recovery and disposal. The best price for resale may be in another market, and global knowledge of traders, buyers and fair market value of the equipment are essential. Linklease has learned the necessary skills to operated in the MENA region, and is providing access to equipment for many sectors. Aristotle said in that “wealth is in use, not ownership”, and Linklease has taken a leaf out of King Hammurabi’s book. The ruler of Babylon in 1750BC, who codified leasing as a concept. It was an obvious way to help small businesses and the Middle East market. It still is. Back then, leasing contracts were written on clay tablets; today the tablets are electronic. Some things never change. i 129