eLease Equipment Leasing

As entpreneuers we all know how the game works.   When the stakes are high typically so are the rewards.  It would seem to me that Obama and Gingrich should not attack Mitt on his success.  Although he only paid 3 million in taxes on 21 million made.  He gave an additional 3 million to charity.  That puts his effective (back to society) rate at almost 30%.  What most people don’t understand is how much risk entrepreneurs undure to make the world a better place and yes maybe make a few bucks.  We die younger, we live harder, and yes we might ruffle a few feathers along the along way. 

Instead of picking on success we should celebrate.  My vantage points allows me to say “Way to go Mitt, How do I do that and do it even better?”  I love this country and I am sad to see people pull down success.  Just my thoughts after the State of the Union and the debates. 

 Also if they really want to create jobs dump employer side Social Security and FICA.  I pay 12.5% on every dollar I pay someone!!!  Come on guys we don’t need tax credits.  We need real cash weekly on payroll……..

http://money.cnn.com/2012/01/05/smallbusiness/doctors_broke/index.htm?hpt=hp_t3&hpt=hp_c1

It is hard to believe smaller practices are having many more financial problems.  The Obama plan makes it even harder with the medical management software the MD’s are mandated to comply with.  It seems that their smart MD’s have to reinvent themselves every year.

May you live in interesting times.   I am wishing that sometimes I didn’t live in the largest credit crisis in history and then other times I feel blessed to navigate my business in a hard economic cycle.In our business we see entrepreneurs use credit lines as well as term financing without thinking what happens if the bank calls my loan?  I really never thought about either until our bank cut one of our credit lines and gave us 30 days to pay it off.  eLease had the ability to pay off the loan but what if we didn’t?  Would the bank seize your assets and worse yet what if your bank was taken over by the FDIC?  As an entrepreneur you could really find yourself in a tough spot.Over the last 3 months we have received a few calls from customers who utilized their banks prior to us and had their lines of credits not renewed.  Although we would like to help we can’t.   It makes it very apparent to me how important people utilize their credit.  If these customer had used eLease we would not and could not call that note.Although we are a lender we are also a borrower and I am forever changed for the dealing the TARP taking bank who left us not at the alter but at the reception.  May you live interesting times.  Yes we do!

If banks aren’t lending and not really supporting small business ie business’s with under 1.5 million per year in revenue where does that leave lenders like eLease and other specialty lenders who service these business.  In many ways I feel as though we are the Anti Bank.  Being that the banks have orphaned this space with exception of a few.  I applaud Regions and will leave my opinion about other banks who took Tarp and left their business providers.
So I guess eLease is the anti bank right now since we are lending and supporting real small business.  Call us if we can help you grow.
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First of all how refreshing to see people seeking to change the world! 

I am always impressed with eager young entrepreneurs who are looking at creating opportunities in difficult times.  I was very impressed with the facility at USF as well at Sean Lux the Professor who is in charge of the program.  The pitches ranged from restaurant concepts to clean energy and some needed 1 million to start and other 30k. 

In all of the negative news of America loosing its footing in the world I would say maybe some of these economists should come and see some of the young future titans of business.  I appreciate USF inviting me and experiencing the bliss of new entrepreneurs.  This road is not always easy but it is the most rewarding journey you can have in live.

 Sleep well America as there are eager entrepreneurs creating future industries out there.  God I wish I were 25 again!

I would suggest that the best way to get people back to work is to help them start their own business.  We have a customer who has created a new way of life and income with a turnkey business of $141.00 per month.  Pretty amazing when you think about it.  It is estimated that each job created in the Recovery Act cost taxpayers over $70,000 per job. 

 Here is a gentleman who is doing it with a rounding error of that money.  Maybe the government needs to take a Micro Economics class instead of Macro.  Everyday I feel blesseed to work with the entrepreneurs in this country who are striving to make a difference and making lemonaid out of lemons.

 Would you like ketchup or mustard with your lease payment???

We officially relaunched our new site this evening and I like the new look and feel.  We went with a them that we work with new companies and smaller growing enterprises.  Entrepreneurs ask me all day “Am I too small for you to work with me?”  The answer is no!  In fact eLease prides itself on offering a solution to all business sizes.Please share with us why you started your business.”I started eLease so I could help entrepreneurs grow their business by maximizing cash flow.  My goal is help create 100,000 jobs by providing capital to our customers!”What’s yours?

Year end tax advantages are yours for the taking!
Did you know that there are ways which might help you to create your own Tax Break in 2010?�
Code Sec. 179 Expensing
A qualifying taxpayer can choose to treat certain property as an expense and deduct it in the year the property is put into service instead of depreciating it over several years.  The Small Business Jobs Act of 2010 (the Act) increases the maximum deduction an eligible taxpayer may elect to claim to $500,000.  The qualifying property cap has also been raised to $2 million and will phase out, dollar-for-dollar, until the qualifying property cost exceeds $2.5 million.

Bonus Depreciation

The Act also extends, through December 31, 2010, the 50% first year bonus depreciation deduction for qualifying property purchased and placed into service in 2010.  The bonus depreciation deduction can be used in addition to the Section 179 deduction.
You should consult with your own tax advisor about the initiatives and how they can help your business.
Now, more than ever, the financing of your business should be on the top of your mind and equipment financing could be a terrific tool for your business.�
eLease specializes in providing equipment finance solutions to business professionals for everything they require …including computer hardware and software, manufacturing, telecommunications, office and medical equipment to name a few.
I would welcome the opportunity to discuss how eLease can help you with your financing needs.

Proposed FASB Legal Differences

In addition to the new differences between accounting for leases and the income tax rules (IRS), there also will be differences between a lease for the Uniform Commercial Code (UCC) and the new accounting rules under proposed FASB changes. Leasing contracts will have to amend several of its “paragraphs.” The announcement of the changes perhaps will come as early as Tuesday effecting an estimated $1.2 trillion in leased assets.

In addition to accounting changes, it will also center around the legal requirements of what the lease contract must say to be considered a legal lease (Article 2A) versus a “disguised conditional sales contract” or “a lease for security purposes” (Article 9).

This is column is a synopsis. It is best to consult your attorney and accountant who have experience in equipment leasing and finance to discuss how the new changes will affect your leasing contract once they are expected to be announced this week as “adopted.”

It may be that “operating leases” or “true leases” will be for shorter time periods and/or more transactions will be “capital leases.” It certainly will result in major changes on the balance sheet and in sales presentations as well as tax consequences.

To find what the UCC defines as a legal lease (true lease) you must go to Article 1 General Definitions and go to Par.1-201 (37) to find the definition of a “security interest” and there you will find that a lease is an exception to a security interest. It begins:

“Whether a transaction creates a lease or security interest is determined by the facts of each case; however, a transaction creates a security interest if the consideration the lessee is to pay to the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee…”

This paragraph is interpreted as the requirement that a true lease must be non-cancelable for the lease term. This requirement is not found in income tax requirements or accounting rules. It is very important to understand this not only in the contract, but for the salesperson making the presentation to understand what he is actually presenting.

The additional requirements must be read in the “negative” because these are what make the lease a lease intended as a security and it will become an article 9 conditional sales contract:

1. The original term of the lease is equal to or greater than the remaining economic life of the goods (it is prudent to limit your lease term to 80% of the economic life to avoid this rule)
2. The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods.
3. The lease has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement, or
4. The lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement.

A transaction does not create a security interest merely because it provides that:

1. The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into.
2. The lessee assumes risk of loss of the goods, or agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs with respect to the goods.
3. The lessee has an option to renew the lease or to become the owner of the goods.
4. The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed, or
5. The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.

For purposes of this subsection (37):

(x) Additional consideration is not nominal if (i) when the option to renew the lease is granted to the lessee the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed, or (ii) when the option to become the owner of the goods is granted to the lessee the price stated to be the fair market value of the goods determined at the time the option is to be performed. Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised.

(y) “Reasonably predictable” and “remaining economic life of the goods” are to be determined with reference to the facts and circumstances at the time the transaction is entered into; and

(z) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate is not manifestly unreasonable at the time the transaction is entered into: otherwise, the discount id determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

In addition Article 2A creates two types of leases; two party leases and three party (finance leases):

A two party lease is a lease between the supplier of the goods and the user of the goods. In this type of lease the supplier becomes the lessor and is “responsible” for the equipments performance.

A three party lease called a finance lease has an equipment supplier (vendor), a lessor, and an equipment user (lessee).

In order for the lessor to eliminate the risk of equipment performance, the lessor must pass the warrantees and guarantees called the “supply contract” from the vendor to the lessee (after informing the vendor to this in a purchase order). In addition the lease must carry a quite enjoyment clause.

Failure of any or all of these rules places the lease under Article 9 and is considered a conditional sales contract requiring the filing of a UCC 1 lien statement to protect the lessor. In certain states, usury may be addressed, as well as the party(ies) involved are not licensed by the state where the lessee is located.

The legal rules are very different from tax or accounting and need to be followed and understood to prevail in a court of law!

Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at leaseconsulting@msn.com or 502-327-8666.

He invites your questions and queries.