In the current economic climate as Covid-19 continues to change the rules of operation on an ongoing basis, businesses all over the country are facing difficult decisions. Many businesses that lease expensive, commercial equipment such as gyms and restaurants, have been closed due to the pandemic. Some are reopening, but their ability to keep the doors open is uncertain at best. Several of these businesses will never return even after they are allowed to reopen. Even when the economy is in an upturn, a business can fail.
If you are a company that leases commercial equipment to gyms and restaurants, or you provide leases for other kinds of assets, it can be difficult to decide when you should find a national repossession company to recover the assets or if you should continue trying to work out payment arrangements to collect the balance of your funds.
Has your asset reached a point of capital recovery?
Capital recovery, in a nutshell, is earning back your initial investment before you start earning profit. For example, if you buy a piece of equipment for $800 and you lease it for $1200, you will need to earn back your investment of $800 before you start to make your $400 profit. If your lessee hasn’t paid back your initial investment and you have yet to profit from your asset, it would be better to recover the asset and auction it off. This way you still have a chance of making a profit.
What is your asset’s salvage value?
Salvage value is how much your item is worth over time. Every item has a useful life or span of time that the item can be used for profit. Every item depreciates or loses value over time as its useful life decreases. Estimating your asset’s salvage value can help you determine if your asset is worth recovering. If your asset’s salvage value is high, it is imperative that you hire Asset Recovery Company; a trusted source to recover your asset in a timely manner. While it may be hard to know what your asset’s salvage value truly is, the experts at Asset Recovery Company are here to help out. Give us a call and we can determine that value for you at little to no cost.
How long should you wait to recover your asset?
- Immediately: If you haven’t recovered your capital investment and the salvage value of your asset is high, you should act fast because every day with a missed payment is a negative return on your investment. Asset recovery is your best option if your lessee is in violation of their lease’s payment guidelines. The longer you wait, the higher risk you run of not being able to obtain your asset and the more likely you are to take a loss on it.
- Fairly Quickly: If you have already recovered your capital and your salvage value of the asset is high, your asset is more valuable to you than the remainder of your lease with your lessee. Recovering the asset and auctioning it off or re-leasing the asset to another business will give you the greatest profit.
- Pause and reflect:If you have already recovered your capital and your salvage value is low, you do have a little bit of wiggle room. You will need to determine if it’s more cost effective to recover the asset right away or wait for payment. How much of a loss you are willing to take on the profit of your asset is up to you.
The risks of chasing missed lease payments
If you wait to recover your asset, several things could happen:
- You could end up spending more money than your lessee owes even after late fees because you will have to pay your employees or a debt collecting company to contact your lessee. If your lessee takes several months to pay you back, the money you spend on resources to receive that payment could rack up quickly.
- Your lessee could negotiate a price with you to settle their lease that’s less than what the salvage value of the asset is and you could lose potential profit if you don’t collect the item. They could also negotiate a price that doesn’t cover the money you will need to spend to collect the debt and you will also take a loss that way.
- Your lessee could never pay the remaining money even after being sent to collections.
- Your lessee could claim bankruptcy. After liquidation, your lessee’s recovered cash could fail to pay off your item. Then you’ll never see a return on your asset because you’ll be without payment and without the asset.
All in all, every situation is different but most of the time, asset recovery will allow you to profit the most after a lessee becomes truant with their lease payments. It is smart to act fast and find a trusted national repossession company, like Asset Recovery Company (ARC), to recover your asset. Contact Us to see how we can help you with your asset recovery needs.