Deciphering the Financial Documents

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This post is part of a series dedicated to the ins and out of the financing process.  This is the third post.  Click here to see the previous part of the process.

Part three- The Financial Documents

Last week we covered how to complete the application.  So at this part of the process, the application is already done and has been submitted to the lender.  Even though you’ve completed the application to the best of your ability, be prepared for the lender to come back and ask for more information or clarification.

Once you have submitted your application, and it has been approved by the credit team (usually within 1-to-48 hours), the lender will begin to assess your options and what programs might be a good fit for your needs.  This is when the lender will draw up the financial documents.  The lease agreement will include information on payment terms and your financial responsibility.

It’s usually not necessary to have a lawyer go over the paperwork, but don’t be afraid to call in counsel if there’s something that doesn’t sit right with you or something you just don’t understand.  Be sure to read the entire document carefully.  Don’t worry! Though it may seem like there is a lot of financial jargon in the financial documents, almost all of it has to do with consequences and actions the lender may take if you don’t pay your bill on time.  As long as you pay on time, you generally won’t have anything to worry about.

Remember, if you do have an issue paying, call your lender first before just skipping out on your bill.  Chances are they will be much more willing to work with you if you call and explain your situation.

Did you have any trouble with the financial documents when you obtained financing?

Stay tuned for next week, where we will cover the final part of the process – the funds.


  1. I would hope that people take a little more effort in reviewing and understanding the terms of a lease agreement. The post above seems to imply that there is nothing that the lessee should really worry about. Here are a few quick things to think about

    1 If you have a fully amortizing lease do you have the option to pay the lease off early. Often you must pay a penalty via a fee or lower discount rate to present value the payments. In many cases the you do not have the contractual rights to pay off early.

    2. What is the late payment penalty. Late payment fees are punitive and often represent an amount far in excess of the lessors economic loss from the late payment.

    3. If there is a default will the lessor demand payment of the outstanding principle or the sum of the remaining payments? Often it is the later

    4. For FMV leases near lease maturity, is there a period you must notify the lessor about your intentions with respect to the leased equipment? Many lessors include auto renewal provisions that extend the lease term for 6 months or more if you fail to meet the notification period. Worse yet unless you notify them some leases can continue indefinitely.

    Lease financing is a fine way to secure capital equipment but this blog post seems to imply that there is nothing really to look at when it comes to the documents. Many lease companies make significant income from innocuous provisions contained in the documents (this is particularly true with item 4 above).

  2. Hi Doug-

    We appreciate the thought you put into your comment. The issues you’ve raised are definitely ones we will work to address in an upcoming blog post. While we certainly didn’t intend to gloss over any of those problems lessees might encounter, we are working from the assumption that if one is working with a solid lender that they trust, those issues will likely not arise. However, we agree that everyone looking for lending should be sure to do their homework and ask questions throughout the process! Thanks for stopping by the blog!

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