R
rmsbuffalo
Guest
I am opening a second restaurant, a decision which was made primarily due to funding that was "approved" through an equipment leasing company. This company solicited me, and approved me for up to $50,000 in equipment. At the time, had no plans to open a new restaurant just perhaps remodel my existing restaurant.
For a few months, my "credit line" lay dormant, while I decided whether or not to remodel, as I had leasehold issues to deal with as well. Through this time, I was frequently urged to "use my credit line".
An opportunity for a second location became available and the facility was a great match for my concept, and in a location that could easily generate 3 times the sales of my original location. When I analyzed financial requirements, I projected 50% of the funding coming through the equipment lease, 25% from cash reserves, and the balance through available credit lines (credit cards). I know the credit card part seems a bit unorthodox, but once the restaurant opens, cash flow immediately increases due to terms to regular vendors which can provide for immediate repayment of these balances and is an effective means of short term funding. To shorten the story, the financial resources seemed to be in place, with no obstacles. Knowing this, and forcasting future performance of the second location, I proceeded and signed a long term lease with the landlord.
I called the equipment leasing company right away to verify the credit line, and to determine the procedure to follow. They instructed me to go shopping, and present them with a list of equipment and suppliers. I did exactly that. It took a lot of measuring, costing, shopping, and designing, but in late December, I had my equipment list ready and was ready to go.
When I notified the Leasing Company, I found that my representative was no longer with the company, however, his replacement said everything was fine and we proceeded. (Note, I really didn't like this guy and probably would've gone elsewhere if he was my first contact).
The leasing company drew up a contract, faxed it to me, and arranged for me to send back signed originals via FedEx (Their account), along with my check for $2500 in "advance payments". Note that my copy of the contract was not signed, but they did cash my check. This agreement was between my company and the leasing company. The only other parties that were involved were the equipment suppliers who according to the contract, were to be "Paid upon delivery".
The lease company issued purchase orders to the equipment suppliers and based on that, they ordered the equipment, much of which required out of pocket cash from them. Note that I asked my representaive if there were anyway that they wouldn't be paid. He said that a purchase order was binding and that failure to pay would be illegal. I confirmed this with my equipment suppliers.
The equipment was delivered roughly 2 weeks ago, and it appears that the leasing company had brokered the lease to a bank. Nowhere in my contract was any bank or third party lender mentioned. Prior to the bank issuing final payment, they reopened my credit history and saw that I had "run up" $20,000 in credit card debt. They decided not to fund the lease. My lease company representative is trying to find "another bank", but doesn't think it's likely. He has stated to 2 of my equipment suppliers that I am "over my limit" (whatever that means), and that it "doesn't look like this is going to happen".
At this stage of the game, I am sitting with elevated debt, exhausted cash reserves, and equipment suppliers that want to be paid. I have a contract with a leasing company that is validated by their acceptance of my check. My vendors have purchase orders from the leasing company, but not from me. I have possession of the equipment. If I send this equipment back to the suppliers, I cannot open (which I will be ready to do in about 10 days or less). Through other expenditures and obligations resulting from this, my failure to open the second location will force the liquidation of all my assets both business and personal.
This company shows no signs of being a sleazy little company out to rip people off. To the contrary, they post a very large, professional website, an extensive telephone network, and a staff of about 100 people.
I know I have to visit my attorney for advise, assistance and a course of direction, but I thought I would solicit some opinions here to better arm myself with options. Note that this is an out of state leasing company (I'm in New York State, they're in New Hamphire). Also, I have tried to reach my representative's supervisor, but he is out of town until March 5.
My questions are:
1. How can I prod the leasing company to honor the contract?
2. Who is responsible to whom? Am I a third party not responsible to the equipment suppliers? Not that I am uncarring to them, to the contrary, I have been dealing with these people for decades. I just need to know my position.
3. At what point is there legal intervention? Should I keep hiring employees and still plan on opening or do I just risk further embarrassment?
4. When I sue this leasing company, where does their liability end? Per this website I have read that if you lose money that you would have otherwise invested in a stock, you can only recover the lost money the rest is speculative. In this case however, the sole purpose of the transaction was to initiate growth, which had I secured other creditors, would still be in place. If I am unable to open, this would be an opportunity lost due to the failure of the leasing company to execute their side of the contract.
5. The following losses and damages come to mind...
Defamation of character ...
Loss of $20k out of pocket...
Loss of $20k short term funding + resultant interest...
Loss of future earnings from both locations...
Any resultant loss of personal property...
How does one measure embarrassment and failure in the eyes of your wife, children, and friends?
Any other ideas?
Help! The ship is sinking and it hasn't left the port.
P.S. Spare me the lectures as we all learn from mistakes, and there are a number of things that I would do differently if I had it to do over again, but going into it, everything was fine and going according to plan until these guys decided not to fulfill their part of the agreement.
For a few months, my "credit line" lay dormant, while I decided whether or not to remodel, as I had leasehold issues to deal with as well. Through this time, I was frequently urged to "use my credit line".
An opportunity for a second location became available and the facility was a great match for my concept, and in a location that could easily generate 3 times the sales of my original location. When I analyzed financial requirements, I projected 50% of the funding coming through the equipment lease, 25% from cash reserves, and the balance through available credit lines (credit cards). I know the credit card part seems a bit unorthodox, but once the restaurant opens, cash flow immediately increases due to terms to regular vendors which can provide for immediate repayment of these balances and is an effective means of short term funding. To shorten the story, the financial resources seemed to be in place, with no obstacles. Knowing this, and forcasting future performance of the second location, I proceeded and signed a long term lease with the landlord.
I called the equipment leasing company right away to verify the credit line, and to determine the procedure to follow. They instructed me to go shopping, and present them with a list of equipment and suppliers. I did exactly that. It took a lot of measuring, costing, shopping, and designing, but in late December, I had my equipment list ready and was ready to go.
When I notified the Leasing Company, I found that my representative was no longer with the company, however, his replacement said everything was fine and we proceeded. (Note, I really didn't like this guy and probably would've gone elsewhere if he was my first contact).
The leasing company drew up a contract, faxed it to me, and arranged for me to send back signed originals via FedEx (Their account), along with my check for $2500 in "advance payments". Note that my copy of the contract was not signed, but they did cash my check. This agreement was between my company and the leasing company. The only other parties that were involved were the equipment suppliers who according to the contract, were to be "Paid upon delivery".
The lease company issued purchase orders to the equipment suppliers and based on that, they ordered the equipment, much of which required out of pocket cash from them. Note that I asked my representaive if there were anyway that they wouldn't be paid. He said that a purchase order was binding and that failure to pay would be illegal. I confirmed this with my equipment suppliers.
The equipment was delivered roughly 2 weeks ago, and it appears that the leasing company had brokered the lease to a bank. Nowhere in my contract was any bank or third party lender mentioned. Prior to the bank issuing final payment, they reopened my credit history and saw that I had "run up" $20,000 in credit card debt. They decided not to fund the lease. My lease company representative is trying to find "another bank", but doesn't think it's likely. He has stated to 2 of my equipment suppliers that I am "over my limit" (whatever that means), and that it "doesn't look like this is going to happen".
At this stage of the game, I am sitting with elevated debt, exhausted cash reserves, and equipment suppliers that want to be paid. I have a contract with a leasing company that is validated by their acceptance of my check. My vendors have purchase orders from the leasing company, but not from me. I have possession of the equipment. If I send this equipment back to the suppliers, I cannot open (which I will be ready to do in about 10 days or less). Through other expenditures and obligations resulting from this, my failure to open the second location will force the liquidation of all my assets both business and personal.
This company shows no signs of being a sleazy little company out to rip people off. To the contrary, they post a very large, professional website, an extensive telephone network, and a staff of about 100 people.
I know I have to visit my attorney for advise, assistance and a course of direction, but I thought I would solicit some opinions here to better arm myself with options. Note that this is an out of state leasing company (I'm in New York State, they're in New Hamphire). Also, I have tried to reach my representative's supervisor, but he is out of town until March 5.
My questions are:
1. How can I prod the leasing company to honor the contract?
2. Who is responsible to whom? Am I a third party not responsible to the equipment suppliers? Not that I am uncarring to them, to the contrary, I have been dealing with these people for decades. I just need to know my position.
3. At what point is there legal intervention? Should I keep hiring employees and still plan on opening or do I just risk further embarrassment?
4. When I sue this leasing company, where does their liability end? Per this website I have read that if you lose money that you would have otherwise invested in a stock, you can only recover the lost money the rest is speculative. In this case however, the sole purpose of the transaction was to initiate growth, which had I secured other creditors, would still be in place. If I am unable to open, this would be an opportunity lost due to the failure of the leasing company to execute their side of the contract.
5. The following losses and damages come to mind...
Defamation of character ...
Loss of $20k out of pocket...
Loss of $20k short term funding + resultant interest...
Loss of future earnings from both locations...
Any resultant loss of personal property...
How does one measure embarrassment and failure in the eyes of your wife, children, and friends?
Any other ideas?
Help! The ship is sinking and it hasn't left the port.
P.S. Spare me the lectures as we all learn from mistakes, and there are a number of things that I would do differently if I had it to do over again, but going into it, everything was fine and going according to plan until these guys decided not to fulfill their part of the agreement.