mdi presentation jan 2016

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  • Airport Corporate Centre 894 Beaver Grade Road, Suite 304Moon Township, PA 15108Phone 412-262-3225 Fax 412-262-1154

    www.acceptlease.com

    7.psd

    *

  • Asset based lending History- Railroads not banks Concept of paying for the use of equipment v paying for ownership Lease v purchaseConsider the useful life of the asset.Tax benefits most common motivator for change.Leasing and Financing are the same today.- Lease with $1 purchase option at the end is the same as financing.

    Equipment Leasing and Finance Options for Retailers Overview*

    History of our industry in the US began in the railroad industry. The capital for railroad infrastructure was so high not enough existed in one place for purchase of all railcars needed. Companies formed trusts and would buy railcars and make them available to others via Lease. Manufacturers who wished to ship goods paid simply for the use of the railcar not necessarily the ownership.

    Over the years the tax treatment for owners of the lease contract have driven many older structures not seen today. Over the years the tax treatment for ownership of the equipment have driven decisions to Lease v Buy.Assets with a long useful life i.e. refrigeration, HVAC etc. are good candidates for asset based loan. Point of sale, and Pin Pads are good lease candidates.*

  • It allows businesses to upgrade or improve equipment without large capital outlay up front.Payment directly to vendor- coordinates with vendor for delivery, and payment.Payments can be structured to cash flow- more repayment options.Low maintenance no yearly financial statement necessary.Payments can include sales tax & installationEliminates payments added to grocery remitEstablishes a new relationship that can help your business grow and expand.No blanket lien filed on all company assets- only the equipment financed.

    Equipment Leasing and Financing for Retailers- Benefits

    Equipment is selected by the customer and the equipment invoice is paid by the finance company on behalf of the customer. By paying the vendor directly payment is coordinated with equipment delivery and installation. Payments usually start after the equipment is delivered and installed. Repayment options can be longer term or balloon payments at the end of a shorter term, or structured to match the useful life of the equipment. Financial statements not required to be submitted each year. Payments include sales tax & installation this also enhances working capital. If you plan to grow your business to multiple locations this option establishes a new relationship as a foundation to expansion.*

  • Application process is quick and simple (in many cases no financial statements are necessary). Decisions today are based on two main criteria- 1. Ability to repay, 2. Willingness to repay With some exceptions- the value of the collateral is less important in the decision.

    Equipment Leasing and Finance Options for Retailers-Application

    As credit scoring models become more sophisticated the approval processes are becoming more efficient. Usually decisions are made in one day with just an application and most recent 3 months of bank statements.Compared to banks subject to regulations would usually require 2 or more years of business and personal financial statements and personal financial statements, possibly 10-20% down payment, followed by blanket lien on all assets of the business. *

  • Banks usually file blanket lien on all the company assets.Usually require multiple years of financial statements and personal financial statement for the decision upfront; and yearly updates during the term.Maybe restricted by collateral or collateral value.Lending limits protect the safety and soundness of national banks, promote diversification of loans, and help ensure equitable access to banking services. These limits prevent excessive loans to one person, or loans to related persons who are financially dependent. The lending limits regulation (12 CFR 32) applies to all loans and extensions of credit made by national banks and their domestic operating subsidiaries. (source Office of Comptroller of the Currency, US Department of the Treasury)Benefit of using the bank is lower rate that may be or may not be fixed.

    Equipment Leasing and Finance Options for Retailers- Pro/Con Bank

    Some of common practices due to regulatory requirements on banks. What maybe a higher rate today may be a bargain tomorrow.*

  • What is the Rate What is the Payment$50,000 at 4.25% for 60 months=$926.48$50,000 at 7.25% for 60 months =$995.97Benefits listed in slide 3 for $69.49/mo. or as most retailers view such things $16.16 per week

    Equipment Leasing and Finance Options for Retailers- Rate or Payment.

    Rate doesnt tell the whole story. Value in relation to price- benefits outlined in slide 3.*

  • Leasing/asset based financing always requires less cash outlay than cash financing and usually requires less than bank financing. When a stores cash position is reduced, liquidity suffers --The ability of current assets to meet current liabilities; a/k/a Working Capital.Cash is a component of current assets, if cash position is reduced for equipment purchases ; then working capital is reduced.

    Equipment Leasing and Finance Options for Retailers- Paying cash

  • Net Income to Net Working Capital ratio tells the business owner how much every dollar of working capital is earning his/her company.EXAMPLE Net Income after taxes / Net working capital = the amount each dollar of working capital is earning the company.$30,000 net income / $150,000 net working capital= 20% return. If this company pays cash for a $10,000 piece of equipment it is giving up $2,000/year in earnings.

    Equipment Leasing and Finance Options for Retailers- Net Income to Net Working Capital

  • Personal Property v Real PropertyReal Property Land and buildingsPersonal Property- everything elseExamples- Point of sale equipment, check stands, signs, refrigeration, shelving, HVAC system, security systems.Grey area- attached to Real Property- walk in coolers, doors (entrance way). Anything that can be claimed as part of the land and buildings if leased/financed may need extra documentation, i.e. Real property waiver.

    Equipment Leasing and Finance Options for Retailers- Equipment types

    Personal property- *

  • Questions?

    Equipment Leasing and Finance Options for Retailers

    If none go back to slide one. Talk about experience and who we are.*

    *History of our industry in the US began in the railroad industry. The capital for railroad infrastructure was so high not enough existed in one place for purchase of all railcars needed. Companies formed trusts and would buy railcars and make them available to others via Lease. Manufacturers who wished to ship goods paid simply for the use of the railcar not necessarily the ownership.

    Over the years the tax treatment for owners of the lease contract have driven many older structures not seen today. Over the years the tax treatment for ownership of the equipment have driven decisions to Lease v Buy.Assets with a long useful life i.e. refrigeration, HVAC etc. are good candidates for asset based loan. Point of sale, and Pin Pads are good lease candidates.*Equipment is selected by the customer and the equipment invoice is paid by the finance company on behalf of the customer. By paying the vendor directly payment is coordinated with equipment delivery and installation. Payments usually start after the equipment is delivered and installed. Repayment options can be longer term or balloon payments at the end of a shorter term, or structured to match the useful life of the equipment. Financial statements not required to be submitted each year. Payments include sales tax & installation this also enhances working capital. If you plan to grow your business to multiple locations this option establishes a new relationship as a foundation to expansion.*As credit scoring models become more sophisticated the approval processes are becoming more efficient. Usually decisions are made in one day with just an application and most recent 3 months of bank statements.Compared to banks subject to regulations would usually require 2 or more years of business and personal financial statements and personal financial statements, possibly 10-20% down payment, followed by blanket lien on all assets of the business. *Some of common practices due to regulatory requirements on banks. What maybe a higher rate today may be a bargain tomorrow.*Rate doesnt tell the whole story. Value in relation to price- benefits outlined in slide 3.*Personal property- *If none go back to slide one. Talk about experience and who we are.*