TRANSACTION STRUCTURES

Standard Structures:

Flexible Structures:

Fair Market Value Leases  (True Lease)

A customer (lessee) option to purchase leased equipment at the end of the lease for fair market value or return equipment.  Monthly payments are tax deductible.

10% Purchase Option

A customer (lessee) option to purchase leased equipment at the end of the lease for 10% of original fair market value.

$1 Buyout (Full-payout Lease)

A customer (lessee) repays lease obligations and take ownership of equipment at the end of the lease term. 

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Operating Leases (Off-Balance Sheet Financing)

A lease that meets certain criteria established by the Financial Accounting Standard Board (FASB) and is not required to be shown on the balance sheet of customer (lessee).

TRAC Leases

Tax-oriented lease of titled motor vehicles or trailers that contains the fixed purchase amount (terminal rental adjustment clause) and otherwise complies with true lease requirements according to IRS rules.

Sale-Leaseback Arrangements

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.

First Amendment Leases

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.

Synthetic Leases

A financing transaction structured to be treated as a lease for accounting purposes and 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.

Note and Security Agreements

An agreement that evidences an assignment by the lessor to the lender, as security for the equipment loan, of the lessor's rights under the lease agreement and a granting of a security interest in the leased equipment.

Master Lease Agreements

A lease line of credit which allows a lessee to obtain additional leased equipment under the same basic lease terms and conditions as originally agreed to, without having to renegotiate a new lease contract with the lessor.

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