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Financing Your
Acquisition

Jon-Paul Cowen
818.710.8621
jonpaulc@earthlink.net
Understanding your Financial
Needs
• What is important to you
– Of primary importance should be Vendor’s products and serv...
Types of Leases
• Basic Lease offerings
– Term Financing
– $1.00 Out Lease
– Operating Lease

• Special Lease Offerings
– ...
Who Provides Financial Services?
– Large Commercial Banks
•
•
•
•

Various Divisions (Commercial lending, Real Estate, etc...
Basic Financing Rules
• Financing of Vendor manufactured products
– For business/commercial purposes only
– “Soft Costs” s...
Why Lease?
•
•
•
•
•

Leasing addresses budget concerns
Leasing conserves cash
Leasing conserves existing and future credi...
Lease Transaction Flow
Vendor Finance
Control Zone
Vendor
Sale
Approval
& Documentation
Funded
& Serviced

Customer Contro...
Who Benefits from Leasing?
Leasing Benefit
Leasing versus Purchasing

The Vendor
The vendor can be more
competitive and ma...
Who Benefits from Leasing
Leasing Benefit
“Bundle” the equipment cost
with maintenance, installation
and training

The Ven...
Who Benefits from Leasing
Leasing Benefit
Flexibility to allow for easily
upgrading the equipment

The Vendor

The Custome...
Who Benefits from Leasing
Leasing Benefit
Leasing is a win-win for
everyone

The Vendor

Your Customer

Vendor sells more ...
Why Customers Lease
Summary
• Leasing provides for easy acquisition of products
and services
• Fits the payment into a bud...
Commonly Asked Questions
Commonly Asked Questions
What is working capital?
Working capital is capital used in the course of
everyday business activ...
Commonly Asked Questions
How are payments determined?
The monthly payment is based on the term of the
lease, cost of the p...
Commonly Asked Questions
Is the rate fixed or does it fluctuate?

It is a fixed rate for the entire term of your lease.
Commonly Asked Questions
Where applicable, are advance payments
applied to my lease or are they held as
security deposits?...
Commonly Asked Questions
Can I add equipment to my existing
lease?
Yes:
•If you have entered into a Master Lease
agreement...
Commonly Asked Questions
What if I want to pay the lease off early?
Prepayments are typically not encouraged;
however, sho...
Commonly Asked Questions
What happens at the end of the lease
term?
Generally, the Obligor owns the equipment for a
nomina...
Commonly Asked Questions
Is insurance required?

Yes, in a form acceptable to the Lender
Commonly Asked Questions
How is personal property tax handled?
Almost all companies pay personal property tax
whether they...
Commonly Asked Questions
Is sales tax charged on leased
equipment?
Yes, tax requirements vary depending on the
location of...
In Closing
• Always start the financing process early
• Chose your Lending Partner(s) carefully
– Big may or may not alway...
Did You Know?
Black Bart was the
gentlemanly bandit who held
up Wells Fargo Stages,
leaving a poem at the scene
of the cri...
Questions?

Please feel free to call me at 818-710-8621
Thank You
Financing Your Acquisition
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Financing your acquisition

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Jon-Paul Cowen, Region Executive, Vision Financial Group

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Financing your acquisition

  1. 1. Financing Your Acquisition Jon-Paul Cowen 818.710.8621 jonpaulc@earthlink.net
  2. 2. Understanding your Financial Needs • What is important to you – Of primary importance should be Vendor’s products and services – How will you acquire Vendor’s products and services? • If financing is an option, the following financial information will be required – Company information • Audited or Accountant Certified Financial Statements – Usually last 2 years plus interim statements (sometimes last 3 years) • Years in Business • Use of product (“essential use”) Begin the financing process early
  3. 3. Types of Leases • Basic Lease offerings – Term Financing – $1.00 Out Lease – Operating Lease • Special Lease Offerings – Master Lease Agreement – Installment Payment Agreement (IPA) Financing Rules are Changing!
  4. 4. Who Provides Financial Services? – Large Commercial Banks • • • • Various Divisions (Commercial lending, Real Estate, etc.) Branch Level (Loan Officer) Direct Leasing Subsidiaries Vendor Finance subsidiaries – Regional Banks • Branch level (Loan Officer) • Intermediary (Referral Partner) – Captive Leasing Subsidiaries • Deere Financial, IGF, HP Finance, etc. – Lease/Finance Providers • CIT, GE, etc. – Independent Leasing Companies – Brokers/Consultants
  5. 5. Basic Financing Rules • Financing of Vendor manufactured products – For business/commercial purposes only – “Soft Costs” should not exceed 20 to 25 percent of the finance balance – Service and Maintenance may be included – “Software Only” can be financed under specific guidelines • Delivery of product – Must be delivered and accepted unless prepayment terms are negotiated up front • Proprietary – Must be a Vendor product or that of an approved partner • Lender usually has a form of security interest in the hardware and/or software
  6. 6. Why Lease? • • • • • Leasing addresses budget concerns Leasing conserves cash Leasing conserves existing and future credit lines Leasing extends payment terms (beyond net 30/90) Leasing offers a complete, single transaction purchasing experience • Leasing reduces major purchase “sticker shock” with low payments • Leasing presents an option for lower payments to increase the sale size • Leasing allows for the acquisition of additional products and services
  7. 7. Lease Transaction Flow Vendor Finance Control Zone Vendor Sale Approval & Documentation Funded & Serviced Customer Control Zone Funding Source Approval & Documentation
  8. 8. Who Benefits from Leasing? Leasing Benefit Leasing versus Purchasing The Vendor The vendor can be more competitive and may be able to sell additional equipment and services The Customer The customer is provided with a cost effective mean to acquire equipment that may allow for the acquisition of additional equipment & services within the same budget planned for the initial cash purchase
  9. 9. Who Benefits from Leasing Leasing Benefit “Bundle” the equipment cost with maintenance, installation and training The Vendor Leasing allows a Vendor to combine these costs while providing necessary maintenance and services to the equipment for the life of the lease The Customer The customer gains greater budgeting control of the total cost of using the equipment and simplifies accounts payable by only paying one invoice
  10. 10. Who Benefits from Leasing Leasing Benefit Flexibility to allow for easily upgrading the equipment The Vendor The Customer Leasing flexibility provides the vendor with an opportunity for future sales and provides for customer retention Offers “peace of mind” as to technology shifts while allowing for the acquisition of additional equipment for new business needs
  11. 11. Who Benefits from Leasing Leasing Benefit Leasing is a win-win for everyone The Vendor Your Customer Vendor sells more equipment, and retain customers for future sales The customer can get the equipment, technology and capabilities they need, not just what they can afford
  12. 12. Why Customers Lease Summary • Leasing provides for easy acquisition of products and services • Fits the payment into a budget – Budget for a single fixed payment – No down payment (in most cases) – It may be possible to finance up to 100% of all costs • Administer a combined invoice – Equipment, maintenance, software and other services • Preserve bank credit lines • Conserves capital • May provide certain tax benefits
  13. 13. Commonly Asked Questions
  14. 14. Commonly Asked Questions What is working capital? Working capital is capital used in the course of everyday business activities. It is also defined as the excess of current assets over current liabilities This is the life blood of a company!
  15. 15. Commonly Asked Questions How are payments determined? The monthly payment is based on the term of the lease, cost of the products & service, then current lease rates and may include certain additional costs or fees as specified when quoted. Cost + Interest Rate = Monthly Payment
  16. 16. Commonly Asked Questions Is the rate fixed or does it fluctuate? It is a fixed rate for the entire term of your lease.
  17. 17. Commonly Asked Questions Where applicable, are advance payments applied to my lease or are they held as security deposits? The advance payments are not security deposits but applied directly at the termination of your initial lease term.
  18. 18. Commonly Asked Questions Can I add equipment to my existing lease? Yes: •If you have entered into a Master Lease agreement equipment can be easily added or traded-up* •If you established an approved credit line, equipment can be easily added or traded-up* •Or you can simply ask the Lender of choice to originate a new lease In many cases, lease payments are simply adjusted and can be made “co-terminus” with the original lease term * subject to material and adverse changes in credit quality
  19. 19. Commonly Asked Questions What if I want to pay the lease off early? Prepayments are typically not encouraged; however, should you desires to prepay your financing agreement, you must contact your Lender and learn what options may be available. As a rule, prepayments are negotiable with respect to incremental sales, add-ons, upgrades or sound business reasons.
  20. 20. Commonly Asked Questions What happens at the end of the lease term? Generally, the Obligor owns the equipment for a nominal cost at the end of the term or agrees to return the equipment in “in good working condition” subject to normal “wear and tear”. Never enter into a lease that does not specify the “End of Term” event(s).
  21. 21. Commonly Asked Questions Is insurance required? Yes, in a form acceptable to the Lender
  22. 22. Commonly Asked Questions How is personal property tax handled? Almost all companies pay personal property tax whether they pay cash, borrow money or lease. In most cases, the Obligor is responsible for making those tax payments directly. If the Lender handles the taxes, usually, they invoice the Lessee for any personal property tax when due and payable.
  23. 23. Commonly Asked Questions Is sales tax charged on leased equipment? Yes, tax requirements vary depending on the location of the equipment and the term of the lease. Some states include an up-front sales tax on equipment, and some states charge sales tax on each lease payment.
  24. 24. In Closing • Always start the financing process early • Chose your Lending Partner(s) carefully – Big may or may not always be the best – Always consider a Captive’s offering first • Understand all the conditions of the financing agreement – Ask if you are not sure • Accept nothing that is not clearly provided in writing – No side agreement – No “trust me” Price is important but not everything
  25. 25. Did You Know? Black Bart was the gentlemanly bandit who held up Wells Fargo Stages, leaving a poem at the scene of the crime to taunt detectives. How was he caught? A dropped handkerchief with a laundry mark left at a crime scene provided the clue that led to his arrest.
  26. 26. Questions? Please feel free to call me at 818-710-8621
  27. 27. Thank You Financing Your Acquisition

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