How Equipment Leasing Began

Although no one knows when equipment leasingearly military uses of equipment leasing. For
first began, archeological evidence suggests it hasexample, the Norwegians and Normans used
been around for at least four millennia. Theforms of lease financing to secure the ships,
evidence also closely ties equipment leasing's originequipment and crews necessary to launched their
to early agricultural development. Archeologistsinvasion of England in 1066 A.D. During a later
uncovered some of the first tangible signs ofperiod, knights leased their armor for battle. In
personal property leasing in the ruins of Ur, an1248, Bonfils Manganella of Gaeta leased a suit of
ancient Sumerian city (in ancient Iraq). Clay tabletsarmor used during the Seventh Crusade, paying a
discovered by archeologists indicate that aroundrental that was close to 25% of the armor's
2000 B.C., Sumerian priests leased farmoriginal value.
implements, land, water rights, and livestock toFor centuries, personal property leasing was not
farmers.recognized in England under their common law. As
Apparently, leasing was also used by thea result of the rising popularity of equipment
Babylonians in the fertile valley between the Tigrisleasing, personal property leasing regulations were
and Euphrates rivers. Ancient Babylonian kingdomsincluded in the Statute of Wales of 1284. Over
authorized farmers to lease farm equipment,time, a few Englishmen began to use leasing as a
oxen and land. Archeological finds reveal themeans to secretly acquire property --- with the
importance of leasing to the most prominentintent of defrauding creditors. At the time, many
Babylonian king, Hammurabi, who codified leasingcreditors based their credit decisions on the value
regulations during his rule (around 1750 B.C.).of property in the borrowers' possession. In 1571,
Around 450 B.C., just south of Babylon, theEngland passed an act that prohibited such
wealthy Murashu family started a bank and leasingfraudulent property transfers while preserving the
house that helped Persian farmers acquire landability to use leasing for legitimate purposes and
and farm equipment. Their firm became one offor reasonable consideration.
the best known financial services providers toBy the early 1800s, both the amount and variety
Persian farmers and land holders at the time.of equipment being leased in the United Kingdom
In other ancient civilizations, leasing proved viablehad increased. The expansion of agriculture,
for acquiring the tools, land, and livestock tomanufacturing and transportation led to more
support agricultural pursuits. There are indicationswidespread use of this form of financing. In
that the ancient Egyptians, Greeks, and Romansparticular, the expansion of railroads accelerated
employed leasing for this purpose.equipment leasing's growth. Many early railroad
In addition to its role in advancing agriculture duringcompanies struggled financially to construct their
ancient times, leasing played a significant role intracks, relying on tolls for track use to generate
sea transportation and military endeavors. Theincome. This development presented an
ancient Phoenicians, known for their prowess andopportunity for enterprising entrepreneurs to
expertise in shipping and trade, employed shipseparately acquire and lease railcars to the rail
charters that bear close resemblance to thecompanies and independent shippers.
modern lease. Many short-term charters thatEquipment leasing continued to play an important
conveyed the use of ships and their crewsrole in England and other parts of Europe as the
resembled the operating leases used today. Someagricultural, manufacturing and transportation
long-term charters were written for periodsindustries expanded. It also began to take root in
covering the estimated economic life of thethe U.S. as these same industries grew. Although
vessels. These contracts often conveyed the use,the first equipment leasing transactions in the U.S.
benefits, and obligations associated with shipinvolved horses, buggies, and wagons, leasing also
ownership. In many cases, these arrangementsgained popularity with the expansion of U.S.
presented some of the same negotiating issuesrailroads. As the rail companies expanded and
that face modern day lessees and leaseequipment leasing began to branch out into the
providers.manufacturing segments, the U.S. started its
Several important military campaigns illustrate thetransition into the modern era of leasing.