Business readiness

Tangible Asset Usage Agreements

What are Tangible Asset Usage Agreements?

A tangible asset usage agreement defines the rights associated with the use various assets required to operate your business.

A tangible asset usage agreement outlines your company’s usage rights over a tangible business asset owned or leased by your company. It typically includes agreements related to fixed assets such as plants and machinery.

Agreements of this type include:

  • Lease Agreements: Cover the terms and conditions, start and end dates,lease and maintenance expenses and the schedule of the asset leased by your company
  • Hire Purchase Arrangements: Allow your company to acquire assets by leasing and paying for the assets in installments
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Why are Tangible Asset Usage Agreements important for business today?

Having an up-to-date and comprehensive collection of tangible asset usage agreements enables your company to:

  • Keep of track of which assets are subject to these agreements
  • Budget for expenses related to lease and hire purchase agreements
  • Monitor the maintenance obligations under the agreements against their current condition
  • Monitor the maintenance obligations under the agreements against their current condition

Why is it important for an event tomorrow?

Having an update to date and comprehensive collection of tangible asset usage agreements is important for an event tomorrow as it helps potential investors to:

  • Examine the terms and conditions related to the use of tangible assets of your company
  • Forecast expenses related to lease and hire purchase agreements
  • Evaluate your company’s ability to raise capital by using fixed tangible assets as collateral
  • Assess information on the tangible assets owned and leased to accurately value your company
  • Determine the key revenue generating assets owned by your company

Pros of Tangible Asset Usage Agreements

  • Budget for funds required in advance as rent and tenure of the leased assets are fixed
  • Improve financial efficiency by accounting for depreciation and amortization of owned assets
  • Mitigate legal risks by clarifying the terms and conditions and rights of use of tangible assets
  • Improve cash flow by accounting for liquid company assets
  • Plan for the replacement of the leased, non- functional or redundant assets
  • Reduced cost and time involved in due diligence by having these agreements readily available

Cons of not addressing this topic

  • More difficult to keep track of payments owed or owing
  • More difficult to keep track of other obligations owed under these agreements
  • More difficult to plan future asset usage strategies
  • Increase in potential for legal disputes where there is ambiguity over the terms and conditions on tangible asset use
  • Increase in due diligence time associated with collating these documents.

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