Amending your lease contract due to payment problems

If you are leasing business assets, such as cars and tools, you make monthly payments. Depending on the number of leased items and the amounts involved, these obligations can make a dent in your finances. A deferral of payment, a pause, on all current payment obligations will give you some financial space.

If you are leasing business assets, such as cars and tools, you make monthly payments. Depending on the number of leased items and the amounts involved, these obligations can make a dent in your finances. A deferral of payment, a pause, on all current payment obligations will give you some financial space. 

Peter-Jan Bentein of the Nederlandse Vereniging van Leasemaatschappijen (Netherlands Association of Leasing Companies) (in Dutch, NVL) explains how the affiliated leasing companies handle requests for deferral of payment. The NVL represents equipment-leasing companies operating in the Netherlands. 

Requests for deferral  

The majority of leasing companies grant requests for deferral of payment to companies experiencing financial difficulties. “I want to support my client during difficult times because otherwise I might receive items for which there is no demand.” Bentein thinks this is the reasoning of many leasing companies. 

The opportunities they offer are different, he continues. “The duration of the payment deferral may be anywhere from 3 to 6 months. Some companies do not require you to make your repayments, just pay the interest. Others will increase the term of the deferral. Or, alternatively, they may decide to increase the lease amount per payment term without renewing the contract duration after the payment pause.” So, we recommend that you ask your leasing company about their policies. 

Personalised advice 

Bentein: “In most cases, a deferral of payment largely takes away the pressure on payment obligations. But in some cases, this is simply not enough.” This is why leasing companies should provide personalised advice. 

A key element is the value of the leased object over time. Take a lorry, for example: as soon as it hits the road, it is worth much less than the carrying value stated in the accounts of the leasing company. Another risk is the resale value of an object. For example, changes in the value of a lorry with a telescope crane will be different from lorry without one. There is also a difference in the value of a 12-metre touring car and a 13.5-metre touring car. “With leasing, the leasing item itself provides security for the leasing company. Touring cars, for example, have lower mileage on them. While this is favourable in itself, the depreciation inevitably continues,” Bentein stresses. 

Recovery period 

Bentein explains that demand for financing for investments in business assets has been on the rise again. This indicates a recovery period. If business owners work out their financial problems, there is a renewed need for investments. “Business owners are eager to use the most state-of-the-art, most efficient, or most economical and sustainable business assets. They will also need to cut costs. But regulations or requirements from clients, for example as part of climate goals, are another factor.” 

There are several additional funding sources available to businesses.  “When it comes to investing in business assets, leasing is an obvious option.” The members of the NVL enforce their acceptance policy. They see opportunities especially during this recovery period, and have funds available. 

Saving money through leasing 

Bentein has 3 tips to help you save money by leasing: 

1. Suggest a recalculation of the leasing contract, for example for leased vehicles. After all, business mileage is decreasing, making it better to make changes now. Otherwise, your business will be purchasing too many miles. This will also help you cut costs. 

1. Be more cautious during economic downturns: always assess if you really need to order new business assets. 

1. Check if you can refinance existing high-value items that you paid for with your own money. You can sell your assets to a leasing company and then lease them back. This is a sale-and-leaseback transaction. It will help you release funds you can use as working capital. You will be paying a monthly leasing fee. 

If you have problematic debts, you should discuss the issue with someone and take action as soon as possible. Use the Debt Action Plan to find an appropriate solution.