Leases, equipment and the building

The short version

• The lease, the equipment and any real estate are part of what keeps the business running. Check each one.
• Read the lease closely: time left, renewal options, rent and whether the landlord will approve you.
• Inspect the equipment and vehicles. Find out what needs replacing soon.
• If you are buying the real estate, expect an appraisal and an environmental review.
• Surprises here usually mean real costs after closing.

The lease

• Time left, including renewal options. Lenders often want the lease, with renewals, to run at least as long as the loan.
• Assignment. Whether the landlord must approve a new owner, and what they will ask for.
• Rent: the current amount, increases and whether it is at market.
• Personal guarantee. Whether the landlord will want one from you.
• Repairs and maintenance: who pays for what.

If the seller owns the building and will lease it to you, make sure the rent is fair and the lease is long enough. Lesson B3.5 covers this.

Equipment and vehicles

• A full list, with age, condition and value.
• Maintenance records.
• What needs replacing in the next few years, and what it will cost.
• Titles for vehicles, and any liens.
• Leased equipment, and whether those leases can transfer.

For equipment-heavy businesses, consider an independent inspection or appraisal. Your lender may require one.

Real estate

If you are buying the building, your lender will order an appraisal and, for most commercial property, an environmental review. Also consider a property inspection, a title search and a check of zoning for your use.