Include Lease Agreement(s)
When getting into business, it takes either deep pockets or a lot of courage to sign a lease.
Take a long, hard look at the risk before locking yourself into any business-related lease. I have observed too many bailout applications from failing businesses rife with costly long-term leases. When my own business went down in flames in 1986, I was the proud signatory on iron-clad leases for a few brand new 4 × 4 trucks. If the hair doesn’t stand up on the back of your neck when considering a lease, you are either really confident in your business, or not paying attention. Signer beware!
Heads-up for anyone considering locking into a lease for the early stages of business:
- Lease agreements are typically for a longer period of time than a rental agreement.
- Leases typically offer lower rates in return for locking you in for a longer period of time.
- Lease agreements are often easy to get into and very difficult, if not impossible, to get out of.
- Even when you think you can get out of a lease, troublesome clauses seem to pop out of the paperwork.
- Lease agreements are usually created by and for the benefit of the lessor rather than the lessee (that would be you).
Be wary of commercial leases that provide the lessor with the option to increase your lease commensurate with your revenue or profit. I recall a case involving a small shop whose lease payments had increased from about $2,000 per month to more than $8,000 because of such a clause.