We understand that each company has its own unique lease requirements. With this in mind, reel ensures flexible lease structures that can handle various funding amounts, term lengths, end of term buyouts and billing schedules. Our ultimate goal is to accommodate all of our clients’ demands accordingly.
Our company has the ability to provide the same level of service to customers seeking to finance either a $100,000.00 purchase or a multi-million dollar project through multiple schedules.
Our company services the middle market, meaning we sustain the flexibility to handle transactions in the $75,000-$250,000 range in the same manner as with our larger $500,000-$10 million transactions. Our customers’ needs are always changing, thus we must be able to meet their demands accordingly.
Types of Structures
Our company specializes in the most common types of leases. These include:
Operating Leases – A Lease that meets the four major qualifications of FASB 13. The qualifications include:
1) No Bargain Purchase Price;
2) No Automatic Transfer;
3) Present Value of Payments not to exceed 90% of the Equipment Cost and;
4) Term of the Lease not to exceed 75% of the Economic Life. It is the responsibility of the Lessee to review and obtain approval from their auditor in regards to a lease structure qualifying as a FASB-13 lease.
Tax Lease – A Tax Lease is specifically structured to show that the benefits and burdens of ownership all vest with the Lessor. Under a Tax Lease, the Lessor receives tax depreciation benefits, ultimately translating to a lower overall cost to the Lessee. In addition, the Lessee writes off the rent expense in the transaction, often times resulting in an acceleration of tax benefits and an overall tax bill reduction.
Capital Leases – A Capital Lease is one in which any one of the criteria for an operating lease is not satisfied. From a financial reporting perspective, this translates to a lease structure that has the characteristics of a purchase agreement. Such a lease is accounted for as an asset and as a related obligation on the balance sheet.
Equipment Finance Agreements – Otherwise known as an EFA, it is a security agreement where the secured party takes a priority interest in the equipment.
Single Transaction – also known as a “one off” transaction. We provide financing through one simple schedule.
Lease Lines of Credit – No obligation/no commitment fee line of credit. The Lessee receives an approval for a certain dollar amount that they may use through multiple schedules over a certain time period (approval subject to credit approval).
Sale Lease Back – Financing of equipment recently purchased by Lessee.
Debt Refinance – Restructuring existing debt with new terms and conditions. The majority of the debt refinancing we provide is for large balloon payments or fair market value buy outs.
Vendor Financing – We provide full service financing for vendors and their customers including private labels, pricing sheets, pooling and other vendor related products.
End of Term Options
We provide end of term structures to meet your specific needs. In each case, we address the customer’s cash flow, operating lease qualification and options to acquire or return the equipment. Each end of term provides its own specific advantage.
$1.00 – Transfer equipment at the end of the term to the Lessee for $1.00
Capped or Closed-Ended – End of Term purchase options from 1%-40% of the original equipment cost. This type of structure works for both capital and operating leases. The higher residual held at the end of term allows for lower payments, thus helping with cash flow. Some capped or closed-ended purchase options come with return options that in turn provide flexibility to the Lessee at the end of term. This type of end of term structure also helps a lease address FASB 13 criteria.
Balloon Payment – Some customers need a specific payment to align their cash flow with their intent to keep the equipment. The balloon payment is the perfect solution in that it includes a low monthly payment with an option to only purchase the equipment for a set amount at the end of term.
Open Ended – Offers the ability to continue the lease agreement on a month to month basis after the completion of the initial lease term. The Lessee may have projects that extend past the expected due date or may not have the replacement equipment ready at that time. For whatever the reason may be, this type of lease allows the Lessee to continue until the equipment is no longer needed.
Fair Market Value – The value of the equipment based on the sale determined at an arm’s length, between a willing buyer and a willing seller. We also offer Fair Market Value options that are capped or not to be less than a specific percentage. Our Fair Market Value options may be determined by the Lessee, the Lessor or by a third party appraiser depending on the structure approved by both parties. In short, we can offer a variety of Fair Market Value options to meet your qualification needs.
Many of our customers have specific cash flow needs due to the seasonality of their industry or the equipment purchased. Some capital purchases may take time to provide results, while other capital purchases will only support a specific project. We understand this and can provide different payment plans.
Step up – For purchases where the cash flow will not be realized immediately. The payments at the beginning of the term are lower than the payments for the remaining term. This is popular when expanding new locations or adding a second piece of equipment to support an already existing piece of equipment.
Step down – For purchases where the equipment will provide immediate cash flow for a specific period of time. This is popular with equipment that is needed to support contracts or specific projects. The contracts or projects have set time limits, yet the cash flow from the equipment after the projects have been completed is unknown. To solve this situation, the customer makes larger payments at the beginning of the lease with lower payments for the remaining term.
Skipped/Seasonal – We provide payments to address seasonality. This works well with farming or seasonal businesses that receive payments for the goods or services during specific times of the year. We even have some customers who prefer just one annual payment.