Lewis J. Cohn,
Managing Partner,
Cohn & Dussi

Over the past three years, we have all experienced challenges in the equipment finance space, including the COVID-19 pandemic, high interest rates, inflation, reduced funding sources, workforce shortages and limited equipment inventories. As we have faced these challenges, we have learned to cope with each one in its own way.

For some of these obstacles, coping has involved a general approach of absorbing the higher costs of doing business and passing them along to the customer. For others, it has included altering the credit box and underwriting deeper and wider to support growth goals and keep investors happy.

However, other lessors have decided to tighten their belts and weather the storm while investing in technology and services that promote productivity, efficiency and control at the same time as reducing internal costs. It is that last point where we believe the legal community must be innovative and reevaluate its deliverables to meet the needs of equipment finance companies and the market in general.

Here is a look at how some law firms are changing to meet these needs. Being on the lookout for some of these qualities in a law firm can also help companies in the equipment finance industry partner with the best law firm for their business.

• Reevaluating and shifting practice areas to meet companies’ needs: The first item worth considering is a firm’s practice areas. Are they focused and bolstered with the right talent? For example, law firms can adapt to equipment finance companies’ needs by developing a compliance practice group to address the latest round of disclosure requirements at the state level. Federal requirements need ongoing monitoring as well. Another relevant practice area to consider — especially knowing that bankruptcy filings are on the rise — is creditor and debtor bankruptcy representation. Look for a firm that has experience in the relevant type of collateral, knowing that representation on medical equipment, yellow iron, cannabis and oil and gas rigs, for example, varies greatly. The talent pool also must be skilled properly to ensure that the right level of resources and associated fees are assigned to the engagement.
• Providing different fee options for companies customized to their situations: The second item to consider related to law firms is fee options. While hourly fees continue to be the default option, many services can be routine and packaged on a flat fee basis with savings passed on to the client. To control costs, clients are also interested in performance- based options, such as contingency fees. The bottom line is that alternative fee arrangements are in demand, offering convenience for customers’ decision-making process as well as their budgets.
• Leveraging technology to make it simple for equipment finance companies to receive instantaneous updates: The third area is technology, with a focus on using it to deliver transparency and control to clients. Today, few law firms have embraced the need for transparency. Those that want to be more transparent might consider offering not only a portal to the system of record for status updates on matters but also the entry of new cases, including the ability for the client to upload documentation. Such a system can be a game changer for all parties if the application is fast, accurate, timely and easy to use. Some law firms have also embraced the needs of clients with volumes of work by implementing an automated and secure file transfer process. Setting up the process can take quite a bit of effort, but in the long run, its implementation can allow both parties to be lean, productive and efficient, with added control as a bonus.
• Offering education and detailed information to support the equipment finance industry: Providing education is another way for law firms to support companies in the equipment finance space. Having someone on the law firm’s payroll to develop and manage seminars, webinars, articles, newsletters, white papers, email broadcasts, workshops and lobby involvement is a great way for a firm to both pay it forward to the market it supports and demonstrate its core competencies to the world. It’s also beneficial for law firms to partner up with their most valued clients to offer on-site sessions on a variety of subjects. Subjects worth considering include:
  • Bankruptcy strategies, including Subchapter 5 representations
  • The upsides and downsides of cannabis
  • The latest on state disclosure rules and federal oversight
  • International ventures and their risks
  • Receivable management strategies by collateral type
  • The latest in fraud, including how to identify and remedy it

Overall, education is a great opportunity for a law firm to promote its brand, expertise and knowledge, all while doing something positive for the equipment finance community.

• Delivering transactional work at the next level: Law firms that support the equipment finance market need to be able to think beyond the standard contract. For example, companies in this space should engage with attorneys who understand the advantages and disadvantages of a UCC Article 2A true lease versus an equipment finance agreement. The application of the right type of contract should address the following concerns companies have during these challenging times:
  • Liability issues associated with certain collateral types
  • Bankruptcy and its impact on a true lease versus an equipment finance agreement
  • Return and purchase options
  • Federal and state tax issues
  • Secured position in the collateral
  • Default situations and their remedies
• Supporting equipment finance companies with pro bono legal work: For law firms that have the resources, time and money, another way they can support the equipment finance community is by providing pro bono legal work. Pro bono work on behalf of the industry is one surefire way for a firm to make its mark in the industry and preserve the marketplace. The industry and its participants will recognize and respect the effort involved in representing their market on issues such as regulations and compliance.
• Establish a unique partnership between the law firm and equipment finance companies for mutual benefit: A final opportunity is for a law firm and its clients in the industry to take the vendor-vendee relationship to the next level — one of a partnership — in which both parties recognize a synergy and set out together to conquer market challenges. Such a partnership could address new market opportunities like aircraft, watercraft in tidal water, or the hospitality industry. Some forms of partnership include consulting on finance agreements. The parties can also discuss the application of best practices to operations and strategies. To jump start this initiative, the law firm could survey its talent pool for subject matter experts and empower them to develop new business relationships or deepen relationships with current clients. These relationships will inevitably benefit both parties.
  To remain competitive, the legal community must listen to its clients and be innovative, proactive and consultative, with the goal of offering solutions that are in line with the times. It may require attorneys to step out of their comfort zones, but the rewards are there for those who want to provide the best service to the equipment finance industry and its participants. As equipment finance companies look ahead into 2024 and beyond, it is important to seek out attorneys and law firms with deep knowledge and expertise in the industry that are willing to go the extra mile as partners.

ABOUT THE AUTHOR: Lewis J. Cohn is the managing partner at Cohn & Dussi. Cohn’s practice focuses on representing lenders in all phases of the commercial loan process, with a special expertise in the collection, workout and liquidation of troubled debt. He is a long-time member of the Equipment Leasing and Finance Association, where he serves on the Credit and Collections Committee. A recipient of the Top Lawyers Award from Boston Magazine, Cohn can be reached at 781-494-0209 or lcohn@ cohnanddussi.com.