Accounting benefits to a lease transaction

A lease is a unique financial tool in that the equipment can be depreciated or expensed, offering many tax advantages for different types of businesses. Discuss accounting specifics with your financial advisor. At lease end there is the option to purchase outright, extend the lease, or turn in the equipment and lease something new, avoiding obsolescence. A true lease can provide the lowest payment of any method of equipment acquisition and terms may be longer than debt financing. Payments on an operating lease do not show up on the balance sheet as debt, therefore, not affecting the company’s ability to borrow. This could be just the answer to capital budget problems. Consider these additional leasing benefits: 
1. Lower upfront payments. 
2. Conserves working capital. 
3. Fixed payments and a fixed term simplify budgeting. 
4. If your business is measured by “Return on Assets,” leasing will improve your ratio. 
5. Leases reduce the debt/equity ratio, enabling your firm to borrow more money.

 
A lease and a loan are two distinctly different financial agreements. The definition of a lease is “a contract by which one conveys equipment for a specified term and for a specified lease payment.” The leasing company purchases the equipment, holds title and leases it to the lessee for a monthly fee. In place of a finance charge or interest rate there is a lease payment.

A loan is the borrowing of money, wherein the borrower incurs a specific finance charge. The equipment is used as collateral and may not be a deciding factor in the loan’s approval.

 

For more information see the Canyon Leasing Home Page

Canyon Leasing CEO interview with Bizymoms.com

1. Tell us about the start of Canyon Leasing business?

Canyon Leasing was founded in 2002 by a group of long term leasing investors as a small ticket, commercial equipment broker leasing company. Years later, the actual broker leasing operations were transferred to another company so that Canyon could concentrate on developing a superior Broker Training program.

2. What inspired you to start this business?

After 33 years in the Leasing Industry I was able to fulfill a life long ambition of combining my leasing industry skills with my love for teaching. Having a background in teaching finance at the University level, as well as a background leading a large public leasing company, and founding a small broker leasing company was a natural fit for starting a company like Canyon.

3. How has Canyon Leasing evolved from where it started?

In order to enhance our training program, we have partnered with Latitude Leasing. Latitude is a broker leasing company that is very similar to the type of company that we are training our clients to create. Each of Latitude’s seven employees worked with me at Advanta and many of them also worked at LeaseComm Financial in the late 1980’s. With Latitude, we have created a great combination of classroom learning and “on the job training”. 

4. What is the secret behind the success of Canyon Leasing?

We are dedicated to our motto “Our client’s success is our success.” With years of experience as a foundation, and a focus on supporting our clients, Canyon is well positioned to help our clients realize their personal goals and develop independence by owning their own leasing company.

5. Let us talk about the Canyon Leasing Business Opportunity?

In this Business to Business environment, contact with customers is typically through phone, fax and e-mail. Therefore, investment in fixed assets is limited and generally only includes a computer with contact management software, a phone and a fax machine. Many brokers choose to work from home or a small office. Face to face contact with customers is usually limited to trade shows, and only a small amount of travel is necessary. As an added benefit, this means that the broker territory is unlimited and they can work with customers on a nationwide basis.

6. Do you believe that yours is a good opportunity for women?

There are many different types of individuals that have been successful as leasing brokers. They do not need to be “cold callers’ or extremely aggressive. They do need to instill confidence in their customers and have the ability to follow-up with vendors, lessees and funding sources to make sure that each transaction is completed in a timely accurate manner. Their ability to communicate, use contact management software and stay with the process equals success. 

7. In your opinion what is the greatest thing about Canyon Leasing?

Our clients can develop a leasing company that has significant repeat business from vendors that rely on leasing as an aide to their sales process and from companies that acquire equipment using lease financing. Many different types of individuals have proven highly successful in leasing and can start their own company due to our affordable investment/low overhead/quick start model

8. Do you think women can have it all?

As a father of three girls, the brother to three sisters and the husband of a phenomenal woman I can answer unequivocally – YES.

9. Your advice to our mom entrepreneurs?

I am a father entrepreneur and therefore have not experienced first hand the challenges and rewards that a mom entrepreneur would have. In many years in the industry, I have enjoyed watching many women become successful leasing mom entrepreneurs.

Canyon Leasing Military Discount

Canyon Leasing Military Discount Program

Canyon Leasing is proud to announce a new discount program to benefit active and retired Military personnel and their spouses. Under this new program, eligible Military personnel receive:

 
• 10% Program fee Discount – Active, full time Military personnel. 
• 10% Program fee Discount – Retired Military personnel. 
• 5% Program fee Discount – Spouses of eligible active Military personnel.
• 5% Program fee Discount – Spouses of eligible retired Military. 

Canyon Leasing greatly values the many contributions and sacrifices made by those who dedicate their lives to the safety and wellbeing of our Country. We want to make it as easy as possible for these brave individuals to peruse individual independence and success by owning their own Leasing Company.

The Benefits of Leasing

THE BENEFITS OF LEASING

Leasing equipment has many advantages over conventional bank
Financing or even over paying cash.
Always remember, Income is not generated from the ownership of
Equipment; it is generated by the use of it!

LEASE and Conserve Capital.
Cash remains untouched, leaving it available for other uses or simply in reserve.

LEASE and secure 100% Financing.
With leasing there is no down payment required as with conventional financing.

LEASE and get Better Terms and Lower Payments.
Equipment can be leased for a considerably longer period of time, affording a much lower monthly outflow of cash.

LEASE and Save Bank Lines of Credit.
Leasing can protect your credit line facilities so that they may be utilized for other profitable purposes.

LEASE and experience More Liberal Credit Criteria.
Canyon in many instances, can obtain financing for equipment via leasing when conventional financing isn’t available or not possible due to stringent or inflexible credit criteria.

LEASE and expect Fixed Payments.
Leasing offers fixed payments. You’ll have no surprises as with conventional variable rate loans.

LEASE and experience No Obsolescence Worries.
At lease end, you have the option to return the equipment if you no longer need or want it. This leaves you free to update and reevaluate where your monthly dollars may be best spent.

LEASE and Enjoy Less Hassle.
Generally, Canyon will approve transactions in just a day or two with information secured over the telephone. This eliminates the need for elaborate financial statements, tax returns, etc. as is routinely required by conventional financing.

Why leasing increases sales and profits

WHY LEASING INCREASES SALES AND PROFITS

• LEASING CLOSES MORE SALES
One of the greatest benefits leasing provides is the speed and efficiency with which a sale can be closed. Payments start immediately –in attractive and affordable terms. Documents can be sent to your customer within 24 hours (usually). You keep control of the sale and get the customer to commit.

• LEASING GENERATES LARGER SALES
You increase the customer’s purchasing power by offering leasing. Since the incremental monthly lease cost of a larger unit or additional features is so small, your customer is more inclined to increase the size of their purchase and your profits!!

• LEASING MAKES IT CONVENIENT
Through leasing, you make it easy and convenient for your customer to acquire your equipment. There is no need to delay your sales while other financing is sought by your customer. You control the sale! Your customer wants, needs, and expects a single source to fulfill their needs. Do not underestimate the convenience and value of this additional service to you and your customer.

• LEASING OVERCOMES THE COST OBJECTION
By quoting lease figures, you present the cost of your equipment in the least expensive terms. You can change a possibly negative price image into an easily budgeted item. Your customer will see that the time and cost savings generated by the new equipment will far exceed the low monthly lease payments.

• LEASING BUILDS REPEATS BUSINESS 
You will find that leasing increases customer loyalty and leads to more frequent add-ons, trade-ups, and new equipment acquisitions than with an outright purchase. Wildwood’s lease program allows you to structure your customer’s agreement to allow them to keep up with changing technologies.

• LEASING PRESERVES MARGINS
Margins can be preserved and a competitive pricing difference minimized when the cost of your equipment is expressed in terms of a monthly lease payment. Removing the monetary burden will allow you to focus you customer on your superior capabilities, performance and cost benefits of your equipment.

LEASING SELLS MORE EQUIPMENT – BUT ONLY IF YOU USE IT!

Leasing Medical Equipment

Leasing Medical equipment

 

If it appreciates, buy it. If it depreciates, lease it.

 

That sentence says it all when it comes down to businesses that need to keep their equipment up to date to stay competitive and to provide the best service available for their clients. Medical and dental equipment is very costly and almost prohibitive to the new doctor just starting his practice. The new practitioner is often strapped with college debt, in the beginning, and probably has to have an investor or take on a partner to start a practice. Financing such a high ticket item poses great financial risk, until a clientle can be built up. And with new technologies constantly emerging, equipment obsolescence is also a real financial danger. Equipment leasing makes all the sense in the world for these two professions. There are others out there, but I’ll get to them in later blogs. 
Most of the equipment necessary can be leased. From dental x-ray machines, dental chairs, and billing software to exam tables, x-ray and scanning machines, etc. on the medical side. Both diciplines can stay up to date and on the leading edge when they lease their equipment. Not to mention the tax advantages available with leasing.
“The most important contribution of the equipment leasing industry lies in providing access to capital” Leasing promotes business growth!”

Hidden costs of leasing

 

1. Non-Cancellable Agreement

When entering into a lease contract, the business owner agrees to make all the lease payments to the end of the term. While there is no penalty for early payoff, the full payments are normally required to pay off the lease early.

2. Document Fees

These fees are administrative costs due upon signing the lease and range from $50 to as much as $350 or more, depending upon the complexity of the lease contract and size of the transaction.

3. UCC-1 Fees

These are fees required by the Secretary of the State where the equipment is being leased. The fee is usually is a one-time percentage that is due upon signing the lease documents.

4. Taxes

In most states, there is a tax on goods purchased. Some states tax at 5 or 6%, or more. The tax is factored into the lease payments, so be prepared to calculate this cost, as it could increase your monthly lease payments $20 or more per month depending upon the total cost of the equipment, and the state of purchase.
5. Insurance

A section in the lease documentation will require that the equipment be covered by insurance. Here the leasing company is protecting their interests. They want to make sure they will be fully compensated for the equipment in the event of fire, theft, flood, etc. Most business owners will already have adequate insurance on their building to cover such equipment (if it is contained and used inside). However other companies using more portable equipment (such as lift trucks, golf carts, hydraulic lifts, bulldozers, etc.) may need to take out additional insurance to assure adequate coverage.
The bottom line is that when you are deciding to lease equipment, be certain you are aware of all costs involved with the transaction. Then balance them against the benefits to choose the appropriate choice for you and your business.

 

For more information see the Canyon Leasing Home Page

Create your own home based business

Tired of working for someone else? Do you have a long commute? Running your own business is the new fantasy. Ask around and it seems that everybody wants to own their own business. Maybe you already have a new idea for a company, along with a fantastic name and logo.
You probably have dreamed about running a business from home. It can be scary, filled with fear of failure. The good news is that small businesses are on the increase. Many of these home companies aren’t side projects, but prosperous businesses.  If you are going to work from home, you must keep the following in mind:
Working from home can be distracting.
It’s hard to stay in work mode when you can hear your family making their everyday noises.
It’s hard to switch off at the end of the day.
When something goes wrong with your phone line/wireless connection, you can feel helpless.
You have to do all the administration yourself.
It can feel isolating, especially when you’re having a bad day.

Perhaps the most important plus you’ll get from working from home is that you will be able to arrange more time with your family. But working from home is still a real job; there’s big money to be made in running your own business. You will need the discipline to “keep your nose to the grindstone.”
If you have the confidence, the commitment, and the initiative you can be successful working from home and running your own business. Canyon Leasing can teach you how to become a Leasing Broker and then coach you day to day as you work from your home. This coaching is invaluable as it can help you stay on track and give you a supportive ear when advice is needed. Hard work, initiative and teamwork with Canyon Leasing can lead to a successful home-based career with family time tops on your priority list.

Equipment Leasing Glossary of Terms

 

Equipment Leasing Glossary of Terms

A
ACCELERATED COST RECOVERY SYSTEM (ACRS) (Modified) 
The Tax Reform Act of 1986 established the modified ACRS tax appreciation system prescribing depreciation methods for each ACRS class in lieu of statutory tables. Equipment is assigned among 3, 5, 7, 10, 15, or 20-year classes depending on ADR lives. 
ALTERNATIVE MINIMUM TAX (AMT) 
An alternative, separate tax calculation based on the taxpayer’s regular taxable income, increased by the taxpayer’s preferences for the year. The resulting amount is called the alternative minimum taxable income (AMTI). After certain exemptions and offsets, the taxpayer determines its AMT and is required to pay the larger of the regular tax or alternative minimum tax. Among the preferences that can increase the taxpayer’s AMTI is the accelerated portion of depreciation, thereby making it more likely that a taxpayer that buys equipment may be subject to the AMT rather than to regular tax. 
B
BARGAIN PURCHASE OPTION 
A lease provision allowing the lessee, at its option, to purchase the equipment for a price predetermined at lease inception that is substantially lower than the expected fair market value at the date the option can be exercised. 
BIG-TICKET 
A market segment, generally dominated by leveraged leases, represented by lease financing over $2 million. 
BROKER 
A company or person who arranges, for a fee, transactions between lessees and lessors of an asset. 
C
CAPITAL LEASE 
Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or financing, if it meets any one of the following criteria: (a) the lessor transfers ownership to the lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a bargain price; (c) the lease term is equal to 75 percent or more of the estimated economic life of the property (exceptions for used property leased toward the end of its useful life); or (d) the present value of minimum lease rental payments is equal to 90 percent or more of the fair market value of the leased asset less related investment tax credits retained by the lessor. (Also see finance lease.) 
CERTIFICATE OF ACCEPTANCE (Delivery and Acceptance) 
A document whereby the lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications. 
CONDITIONAL SALE 
A situation under the income tax provisions whereby the actual user is seen as the owner of an asset for availing the capital allowances. In India, a conditional sale will include the Hire Purchase transaction. 
D
DIRECT FINANCING LEASE (Direct Lease) 
A non-leveraged lease by a lessor (not a manufacturer or dealer) in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria. 
E
ECONOMIC LIFE (Useful Life) 
The period of time during which an asset will have economic value and be usable. 
EFFECTIVE LEASE RATE 
The effective rate (to the lessee) of cash flows resulting from a lease transaction. To compare this rate with a loan interest rate, a company must include in the cash flows any effect the transactions have on federal tax liabilities. 
EQUITY PARTICIPANT 
The owner participant, trustor owner, or grantor owner. 
EQUIPMENT SCHEDULE 
A document that describes in detail the equipment being leased. It may also state the lease term, commencement date, repayment schedule and location of the equipment. 
F
FAIR MARKET PURCHASE OPTION 
An option to purchase leased property at the end of the lease term at its then fair market value. The lessor does not have the ability to retain title to the equipment if the lessee chooses to exercise the purchase option. 
FIRST AMENDMENT LEASE 
The first amendment lease gives the lessee a purchase option at one or more defined points with a requirement that the lessee renew or continue the lease if the purchase option is not exercised. The option price is usually either a fixed price intended to approximate fair market value or is defined as fair market value determined by lessee appraisal and subject to a floor to insure that the lessor’s residual position will be covered if the purchase option is exercised. 
If the purchase option is not exercised, then the lease is automatically renewed for a fixed term (typically 12 or 24 months) at a fixed rental intended to approximate fair rental value, which will further reduce the lessor’s end-of-term residual position. The lessee is not permitted to return the equipment on the option exercise date. If the lease is automatically renewed, then at the expiration of that initial renewal term, the lessee typically has the right either to return the equipment without penalty or to renew or purchase at fair market value. 
FINANCE LEASE 
Typically, a finance lease is a full-payout, noncancellable agreement, in which the lessee is responsible for maintenance, taxes, and insurance. 
FULL PAYOUT LEASE 
A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease plus an acceptable rate of return, without any reliance upon the leased equipment’s future residual value. 
G
GUIDELINE LEASE 
A lease written under criteria established by the IRS to determine the availability of tax benefits to the lessor. 
H
HELL-OR-HIGH-WATER CLAUSE 
A clause in a lease that reiterates the unconditional obligation of the lessee to pay rent for the entire term of the lease, regardless of any event affecting the equipment or any change in the circumstances of the lessee. 
I
INDEMNITY CLAUSE 
A clause in which the lessee indemnifies the lessor from loss of tax benefits. 
INDENTURE OF TRUST (Indenture) 
An agreement between the owner trustee and the indenture trustee: The owner trustee mortgages the equipment and assigns the lease and rental payments under the lease as security for amounts due to the lenders. Same as a security agreement or mortgage. 
L
LEASE 
A contract in which one party conveys the use of an asset to another party for a specific period of time at a predetermined rate. 
LEASE RATE (Rental Payment) 
The periodic rental payment to a lessor for the use of assets. Others may define lease rate as the implicit interest rate in minimum lease payments. 
LESSEE 
The user of the equipment being leased. 
LESSOR 
The party to a lease agreement who has legal or tax title to the equipment, grants the lessee the right to use the equipment for the lease term, and is entitled to the rentals. 
LEVERAGED LEASE 
In this type of lease, the lessor provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis. The lessor receives the tax benefits of ownership. 
M
MASTER LEASE 
A contract where the lessee leases currently needed assets and is able to acquire other assets under the same basic terms and conditions without negotiating a new contract. 
MIDDLE MARKET 
A market segment generally represented by financing under $2 million and dominated by single investor leases. 
N
NET LEASE 
A lease wherein payments to the lessor do not include insurance and maintenance, which are paid separately by the lessee. 
NONRECOURSE LOAN 
In a leveraged lease, the lenders cannot look to the lessor for repayment. The lender’s only recourse is to the lessee and, therefore, the lessee’s credit rating is of prime importance. 
O
OPEN-END LEASE 
A conditional sale lease in which the lessee guarantees that the lessor will realize a minimum value from the sale of the asset at the end of the lease. 
OPERATING LEASE 
Any lease that is not a capital lease. These are generally used for short term leases of equipment. The lessee can acquire the use of equipment for just a fraction of the useful life of the asset. Additional services such as maintenance and insurance may be provided by the lessor. 
P
PACKAGER 
The leasing company, investment banker, or broker who arranges a leveraged lease. 
PRESENT VALUE 
The current equivalent of payments or a stream of payments to be received at various times in the future. The present value will vary with the discount interest factor applied to future payments. 
PURCHASE OPTION 
A provision by which a lessee has the right to purchase the equipment at the end of the lease. The purchase option may be stated at a specified amount or at fair market value. 
PUT OPTION 
The requirement to purchase equipment at a particular time and at a predetermined price. In a lease transaction, this is a lessor’s right to force the lessee (or some third party) to purchase the equipment at the end of the lease term. IRS guidelines prohibit put options in tax-oriented leases. 
R
RESIDUAL VALUE 
The value of an asset at the conclusion of a lease. 
S
SALE-LEASEBACK 
An arrangement whereby equipment is purchased by a lessor from the company owning and using it. The lessor then becomes the owner and leases it back to the original owner, who continues to use the equipment. 
SALES-TYPE LEASE 
A lease by a lessor who is the manufacturer or dealer, in which the lease meets the definitional criteria of a capital lease or direct financing lease. 
SINGLE INVESTOR LEASE 
A tax-oriented lease whereby the lessor achieves its desired rate of return via a combination of the rental payments, depreciation, and the fair market value ofthe equipment at the end of the original lease term. Because of the value of the tax benefit, the rental payments will be lower than for a finance lease. 
SMALL-TICKET LEASING 
Transactions under $100,000, typically using conditional sale leases or single investor true leases. 
STIPULATED LOSS VALUE 
A schedule included in a lease that states the agreed value of equipment at various times during the term of the lease and establishes the liability of the lessee to the lessor in the event that the leased equipment is lost or rendered unusable during the lease term due to a casualty loss. 
SYNTHETIC LEASE 
A synthetic lease is basically a financing structured to be treated as a lease for accounting purposes, but as a loan for tax purposes. The structure is used by corporations that are seeking off-balance sheet reporting of their asset based financing, and that can efficiently use the tax benefits of owning the financed asset. 
T
TAX LEASE 
A lease wherein the lessor recognizes the tax incentives provided by the tax laws for investment and ownership of equipment. Generally, the lease rate factor on tax leases is reduced to reflect the lessor’s recognition of this tax incentive. 
TRAC LEASE 
A tax-oriented lease of motor vehicles or trailers that contains a terminal rental adjustment clause and otherwise complies with the requirements of the tax laws. 
TRUE LEASE 
A type of transaction that qualifies as a lease under the Internal Revenue Code. It allows the lessor to claim ownership and the lessee to claim rental payments as tax deductions. 
TRUSTEE 
A bank or trust company that holds title to or a security interest in leased property for the benefit of the lessee, lessor, and/or creditors of the lessor. A leveraged lease often has two trustees: an owner trustee and an indenture trustee. 
V
VENDOR LEASING 
A working relationship between a financing source and a vendor to provide financing to stimulate the vendor’s sales. The financing source offers leases or conditional sales contracts to the vendor’s customers. The vendor leasing firm substitutes as the captive finance company of a manufacturer or distributor through the extension of leasing to customers, provisions of credit checking, and performance of collections and operational administration. Also known as lease asset servicing or vendor program.

 

For more information see the Canyon Leasing Home Page

Benefits of Leasing

Benefits of Leasing

· Preserve Credit LinesLeasing is another source of credit. Thus, existing lines of credit remain open for other revenue generating activities.

· Improve Financial RatiosLeases structured as operating leases can provide off balance sheet financing. When this type of structure is used, the lease payments are not reflected as a liability on your balance sheet, thus improving your financial ratios. Consult your tax advisor for specific recommendations.

· Improve Cash Flow With no down and low monthly payments, leasing enables you to acquire the equipment your business needs without straining your cash flow. Leasing allows you to reserve cash flow for other uses like payroll.

· Smart Cash ManagementSavvy businesses know that there is little value in using cash to invest in assets that depreciate. Leasing lets you save your cash for activities that generate revenue.

· Tax AdvantagesAs a lease customer, you can realize tax benefits in the form of rental payment deductions as regular operating expenses. And, if your business is subject to the alternative minimum tax, lease payments are not considered a tax preference item and, therefore; do not increase the minimum tax liability. Consult your tax advisor for specific recommendations.

· 100% FinancingUnlike other forms of financing, leasing allows you to finance your total equipment solution including hardware, software, training, and installation.

· Maximize the Current Equipment Budget Leasing allows you to match payments to the revenue generated from using the equipment. Pay for Equipment Over TimeLeasing your equipment allows you to pay for it over time — not up front as with cash purchases

For more information see the Canyon Leasing Home Page