NAELB Equipment Leasing Association -

General-Purpose Statement :”

Purpose of this speech is to better educate business owners on equipment financing.Hopefully they will leave seminar with the tools to evaluate if lease financing theirEquipment is the best way to grow their business..

So that – they will be able to effectively evaluate if equipment financing is a smart tool to acquire the equipment to grow their business and maximize their profits .

Great Lakes Speech :

“ Equipment Leasing - Dispelling the Myths “

I - Opening Statement :

The goal of my speech today is to leave you with better information on how to decide if equipment leasing is the most cost effective business of financing for growingyour business. Equipment leasing is not necessarily for everyone , but todaythere are some startling statistics about who leases and why the smart businessowner ignores at his own peril:

I hope dispel many fallacies and myths about equipment leasing such as :

* Equipment leasing is the financing of last resort after all else fails ! * Leasing is usually more expensive than traditional bank loans. * Lease companies charge a non-competive rate compared to banks. -- lease financing done today writen by the same banks Lease agreements lock you into keeping non-useful equipment for your business Leasing is for startup businesses ( Truth – growing businesses)

II - History Of Equipment Leasing & Relevant Equipment Leasing Statistics

“ Clay tablets discovered in 1984 show equipment leasing transactions occurred in about 2010 B.C. in the ancient city of Ur. Priests who were the governing bodies rented agricultural tools to farmers and rented land; hence, the first recorded leasing transactions. ‘ Equipment Leasing Association” Equipment Leasing Association . US Leasing Origins - 1700’s - Horse Leases by Livery stables owers . 1870’s - Railroad / Barges 1920’s - Vendors offering financing to sell equipment. 1954- US Leasing Corp – first general equipment lessor. 1960;s - IBM and Xerox - popularize computer & copier leases. 2004 – 80% of businesses lease equipment , 30% of all equipment financed is leased. “ The first recorded leases of personal property in the U.S. seem to have been leases of horses, teams of horses, buggies and wagons by liverymen or livery stables in the 1700s. Modern equipment leasing in the U.S. had its significant beginnings in the 1870s in connections with the financing of barges, railroad cars, and railroad locomotives under equipment trust certificates. 1900s, railroad equipment was commonly financed. the first true leases and operating leases of equipment other than ships came from transactions where railroad lessors purchased or manufactured railroad cars for lease to shipper lessees under arrangements whereby the lessor would maintain the cars and own them at the end of the lease termIn the 1920s, manufacturers sought to encourage sales of their equipment, thus the evolution of vendor leasing In 1954, U.S. Leasing Corp. became the first company formed to engage in general equipment

leasing. The percentage of capital acquisition by leasing versus other methods of financing equipment has grown every year. In 1996, equipment leasing constituted $169.9 billion of the $566.2 billion spent in the U.S. on capital acquisition, up from the estimated $151.4 billion in 1995. In the 1960s, IBM and Xerox leased theirComputer equipment . . computer leasing by independent third-party leasing companies became popular during the 1960s.

-- ELA Statistics – http://www.elaonline.com/industrydata/trends.cfm

80% of businesses finance some of their equipment Did you know that 80% of all U.S. companies lease equipment and 30% to 35% of all capital equipment is currently acquired through lease financing?

$ 240 billion in equipment leased in 2002

III - 10 Common Mistakes Made in Considering Leasing About Leasing or Leasing Assumptions that may not be true.

- Leasing is for individuals with bad business or personal credit - I should evaluate equipment purchases based on the interest rate- Leases can not be paid off early or re-written- I am better off going to the bank for a loan for leasing my equipment- My bank will be upset with me if I don’t use him for financing my equipment . - Leasing vehicles is different than leasing equipment- Co-Signors with good credit can sign in place of owners with poor credit - Leases cannot be paid off earlier- It is more cost effective to pay a lease off early than use tax benefits- Business owners consider before tax , but forget to evaluate after tax cost of leasing- If I make a downpayment it will be easier to get approved for a lease - Leasing is always more expensive than bank borrowing - Paying cash for your equipment is always cheaper than financing your equipment- I don’t want to lease the equipment , I want to own it .- If I am not sure I want to keep the equipment then it may make sense to lease it.- Businesses lease equipment only if they are looking for tax benefits.- If I lease equipment I can’t get the same tax benefits when I buy my equipment- My banker will be upset with me if I don’t finance with him/her .- My accountant understands equipment leasing and if it is best for me - It is better to use my line of credit than pay a higher interest rate on a lease- I am better offer buying the equipment with my business credit card becauseI intend to pay off the balance anyway. - If I lease the equipment that will reflect negatively as additional debt on my credit bureau.- My banker understands if a lease or loan is better for my business .- A bank loan is less risky to me or my business than an equipment lease ( calling in a note) - My friend did a lease and it was very expensive- All leasing companies charge a similar rate.- All Leasing companies charge a high interest rate.- It will cost me more if I go through an independent equipment lease company

IV _ Facts you Need to Know to Know if An Equipment Lease is Right for You

What else would I do with the money if I didn’t use it pay for the equipment How good is my personal credit

Do I plan to grow the business in the next 3-5 years Will I be looking for more equipment to grow my business ? Will I probably be replacing or updating this equipment in the next few years Does my banker look closely at the amount of debt I am keeping on my balance sheet. Do I need my line of credit for day to day working capital Do I like to keep a decent amount of working capital available for rainy days. Would a seasonal payment program better fit my budget / cash flow needs ..

V- Why it is Not Always Cheaper to Pay Cash or Borrow from Your Bank

Opportunity Cost of Capital - If you earn a greater ROI on your cash elsewhere why use it on equipment that may depreciate rapidly.

Leasing is Easier on a Budget - If you are continually upgrading and adding New equipment FIXED monthly payments make it _

A) Easier to take advantage of future business investment opportunitiesB) More predictable cash flow C) Maximize Tax Savings to take advantage of profit generating , labor saving equipment

Bank Borrowing is not always as advertised - A) Compensating balance requirementsB) Required hefty downpayments on term loans ( 20 to 40% C) Term loans reducing overall borrowing abilityD) Line of credit reduction putting cash flow constraints on the business during slow timesOr even more so during fast growth. More businesses go out of business due to FAST GrowthThan slow growth .E) Variable interest rates subject to increase at bad timesF) Closing costs and other hidden bank fees increase the actual cost of money .

Cash is paid for in today;s high value dollars, when you finance later years are paid In inflation reduced dollars ( time value of money) If inflation is 5% , $ 1.00 today Is only worth .78 in 5 years. Growing businesses have limited free cash flow or often negative. Every dollar saved can

Be reinvested for greater profit Higher debt on your balance sheet makes you less appealing to banks and result in higher rates Variable rates wreak havoc on a monthly budget - if your rates start rising when inflation is raising your employee wages, when insurance premiums go up that increase the rate of other borrowing Banks can or do call in bank loans if they don’t like the trend in your financials or even if other competitors are suffering to you

What Happens if You Want to Upgrade or Replace your Equipment – doesn’t leasing lock you in ? not necessarily , in many instances you can re-write your lease . Just contact your vendor , he can give you a trade in , and you can write a new lease without paying any additional finance costs from your initial lease . ( Best of all you don’t have to even write a new check , just adjust your

monthly payments MASTER LEASES can make it fast, easy , and convenient to add new equipment for long term

projects .

Links or attachments Of Interest

http://www.chooseleasing.org/Basics/history.htmLease vs Loan Graphic : http://www.chooseleasing.org/Basics/#LseLoanELA Stats http://www.elaonline.com/industrydata/trends.cfm

Resources for Preparing :

Article :

12 Ways to Make A Better Presentation than Anyone Elsehttp://www.grahamcomm.com/mm-20.html

Making a Winning Presentation http://www.grahamcomm.com/mm-28.html

Book / Workbook :

Your Public Speaking Workbook Small Ticket Leasing : Toastmasters Workbook

Tape :

Art Linkletter – Zig Ziglar –

Websites : Resources for Business Owners to check out to find out more about leasing & their personal credit . http://www.bankrate.com/brm/news/biz/green/leasestep1.asp

Mind Mapping : http://studenttabletpc.blogs.com/the_student_tablet_pc/2005/01/mind_mapping_ov.html

http://studenttabletpc.blogs.com/the_student_tablet_pc/files/mind_mapping_overview.pdf

Equifax Credit Report Basics https://www.econsumer.equifax.com/consumer/sitepage.ehtml?forward=elearning_credit11 – What ?https://www.econsumer.equifax.com/consumer/sitepage.ehtml?forward=elearning_credit13 – Fixing ! https://www.econsumer.equifax.com/consumer/sitepage.ehtml?forward=elearning_credit31 Credit https://www.econsumer.equifax.com/consumer/sitepage.ehtml?forward=elearning_credit21

http://www.ftc.gov/os/2004/06/040624factafreeannualfrn.pdf - Updated FCRA – free credit reports.

Small companies that use leasing as a strategic financing option have several traits in common: Most are either partnerships or corporations; have more than $250,000 in assets; have been in existence for less than 20 years; employ managers that have a least five years' worth of experience; and are not among the firms with the very strongest credit ratings.

These are among the findings from a study by The Equipment Leasing and Finance Foundation (ELA), an Arlington, Va.-based non-profit association representing those in the equipment leasing and finance industry. "The study implies the motivations behind the lease versus buy decision of small, privately held firms," said Lisa Levine, the ELA's executive director. She indicates there is a strong correlation between the characteristics of the small firm mostly likely to lease equipment versus purchase, and the top three reasons to lease identified by a study of larger firms. She said the results show that small firms that are "younger and growing would find that the advantages gained by leasing equipment help them compete." Overall, equipment leasing is estimated at $244 billion in 2002, the organization added. More information about leasing, including questions to ask before signing a lease, can be found at www.LeaseAssistant.org; the ELA's Web site is www.elaonline.com.Bus. Coll.: 143S1518

Article A94264932

http://www.ftc.gov/os/statutes/fcra.htm - Fair Credit Reporting Act