Chapter 1. Introduction				1

Part One: Background
Chapter 2. Leases and Loans: Classification Issues				11
	Understanding Lease Classifications			12
	Leases and Loans for Federal Income Tax Purposes			14
		Implications of lease or loan treatment		14
			Finance lease or conditional sale lease	14
			True lease	15
		Rules for classifying as lease or loan		15
		What if we get it wrong?		18
	Leases and Loans for Financial Reporting Purposes			19
		A brief history of leasing accounting		20
		Implications of lease or loan treatment		22
			Operating lease--lessee	23
			Direct finance lease--lessor	23
			Capital lease--lessee	26
		Rules for classifying as lease or loan		27
		What if we get it wrong?		28
	Leases and Loans for Uniform Commercial Code Purposes			29
		Implications of lease or loan treatment		30
		Rules for classifying as lease or loan		31
		What if we get it wrong?		33
	Summary			35
	Review Questions			35
Chapter 3. Why Small Ticket Leasing is Different				39
	Key Reasons Why Legal Issues are of Lesser Importance			40
		Form driven		40
		Type of lease		41
		Creditworthiness of lessee		43
	Summary			45
	Review Questions			46

Part Two: Documentation Issues
Chapter 4. Key Lease Contract Provisions				47
	Key Contract Provisions			50
		Master lease/schedule language		50
		Rent description		50
		Late fee		51
		Equipment description		51
		Equipment location		51
		Security deposits		52
		Hell or high water clause		52
		Lessor assignment		52
		Lessee sublease or assignment		53
		Conspicuous warranty disclaimer		54
		General indemnity		54
		Taxes		55
		Income tax indemnity		55
		Maintenance provisions		55
		Insurance provisions		56
		Event of loss		57
		Default provisions		58
		Return provisions		60
		Purchase/renewal options		60
		UCC Article 2A		60
		Additional lessor duties		61
		Lessee statements		61
		Further assurances		61
		Choice of law/consent to jurisdiction		62
	Summary			62
	Review Questions			63
Chapter 5. Additional Lease Documents				66
	Commitment Letter			66
	Lease Summary Sheet			69
	Guaranty			69
	Vendor-Related Agreements			76
	Broker-Funder Documentation			76
	Lessee Certificates			77
		Secretary's Certificate		77
		Good standing certificate		79
	Landlord/Mortgagee Waivers			80
	Insurance Certificates			80
	TRAC Documents			81
	Summary			82
	Review Questions			83
Chapter 6. Financial Elements in a Lease				85
	Lease Payment Elements			85
		Lease commencement		86
		Length of lease term		87
		Billing frequency		88
	Lease Payment Structures			90
		Straight-line or level payments		90
		Accelerated payments		91
		Decelerated payments		92
		Custom payment structures		94
	Yields, Rates and Profitability			95
		Yield		96
		Implicit interest rate		96
		Rate		98
		End position/residual value		99
			Fair market value purchase options	100
			Fixed price purchase options	101
			End of lease renewal option	102
	Less Common Lease Provisions			102
		Buyouts		102
		Add-ons/master leases		103
		Upgrades		103
		Government leases		104
	Summary			105
	Review Questions			107
Chapter 7. The Lease Package				110
	The Credit Decision			111
		Undesirable lease transactions		114
	Completed Application			115
		Basic information		115
		Information on principals		117
		Credit references		118
		Trade references		118
		Bank references		118
	Equipment Description			120
	Transaction Summary			122
		Background and history		122
		Purpose of the lease		122
		Collateral evaluation		123
		Customer's future prospects		123
		Primary and secondary sources of debt repayment		123
		Comments section of the transaction summary		124
	Business and Personal Documents			124
		Business documents		124
		Personal documents		125
	How to Avoid Problems			125
	Summary			126
	Review Questions			127
Chapter 8. The Documentation Process				131
	Contingencies Cleared			131
	Correct Name of Debtor/Lessor			131
	Invoices			131
	Sales Tax			132
	Commitment/Documentation Fee			132
	Purchase Orders			132
	Shipping Date			132
	Document Signing			132
	Advance Rental Check			133
Part Three: Selling Leasing
Chapter 9. Benefits of Leasing to Lessees: The Evidence				134
	Does the Economy Affect Leasing Attitudes?			135
	Propensity to Lease Among Small Firms			138
		Does organizational form influence leasing?		138
		Does company size affect leasing?		139
		Does leasing depend upon years in business?		140
		Is leasing related to owner experience?		141
		Is lease usage affected by credit risk?		142
	Survey of Small Business Administration Winners			143
		Benefits of leasing		143
	Leasing In the Lodging Industry			144
	Financing Strategies for Start-Up Companies			146
		Start-up strategies		146
		Start-up attitudes toward leasing		147
			Increased cash flow	148
			Balance sheet management	148
			Obsolescence	148
			Burn rate	149
	Leasing in the Commercial Truck Market			150
		Full-service lessees--why we lease		151
		Finance lease lessees--why we lease		151
	Summary			152
	Review Questions			154
Chapter 10. Selling Leasing in Vendor Transactions				156
	Leasing's Advantages to a Vendor Sales Representative			157
	The Benefits of Leasing to a Vendor's Customers			159
		Leasing conserves capital		159
		Leasing provides tax-timing advantages		161
		Leasing lessens the impact of inflation		161
		Long-term fixed rate financing		162
		Leasing overcomes budget limitations		163
		Leasing provides an alternative credit source		163
		Leasing provides flexibility for growth		164
	Leasing and the Time Value of Money			164
		Future value in the lease versus buy decision		166
			The timing effects of lease versus purchase	167
		Capital conservation in the lease versus buy decision		168
			Example assumptions	168
			Special bonus depreciation wrinkle	169
			Example cash flows	169
		When capital conservation is not valued		173
	Equipment Rentals			174
		Rental versus bank loan		175
		Rental versus lease		176
	Summary			177
	Review Questions			178
Chapter 11. Financial Alternatives: The Customer's Viewpoint				181
	Availability of Capital			182
	Comparing Leasing to Other Financing Alternatives			183
		Cash purchase		183
			Advantages of a cash purchase	184
			Disadvantages of a cash purchase	186
		Bank loan		188
			Advantages of a bank loan	189
			Disadvantages of a bank loan	189
		Rental		191
			Advantages of a rental	191
			Disadvantages of a rental	192
		Leasing		193
			Advantages of leasing	194
			Disadvantages of leasing	197
	Summary			201
	Review Questions			201
Chapter 12. Financial Alternatives: The Vendor's Viewpoint				204
	Vendor Objectives for Financing Programs			204
		Accounting objectives		204
		Economic or financial objectives		205
		Marketing objectives		205
		Tax objectives		206
	Comparing Leasing to Other Financing Alternatives			206
		Cash sale		207
			Advantages of a cash sale	207
			Disadvantages of a cash sale	207
		Bank loan		208
			Advantages of a bank loan	208
			Disadvantages of a bank loan	208
		Rental		209
			Advantages of a rental	209
			Disadvantages of a rental	210
		Leasing		210
			Advantages of leasing	211
			Disadvantages of leasing	212
	Summary			212
	Review Questions			213
Chapter 13. Lease or Purchase: Key Determinants				215
	Businesses That Are Most Likely Candidates for Leasing			216
		Growing/expanding firms		216
		Profitable businesses		217
		Tax timing issues		218
		Obsolescence		220
		Controlling working capital		220
		Accounting concerns		221
	Leasing Activity Information by Lessee			222
	Qualifying a Leasing Prospect			223
	The Purchase or Lease Worksheet			225
	Summary			226
	Review Questions			226

Part Four: Relationships with Vendors and Funders
Chapter 14. Vendor Development				229
	Questions to Ask a Vendor			229
		Questions about the vendor's company		230
		Questions about the vendor's equipment		231
		Questions about the vendor's customers		231
	Major Vendor Questions/Objections			232
		Rates		232
		Credit criteria		233
		Turnaround time		233
		When the vendor is paid		233
		How paperwork is handled		233
	Selling the Benefits of Leasing			233
		Increase sales		234
		Reduce bad debts		235
		Bundle extra services		235
		Immediate cash		236
		Enhance vendor's image		237
	Summary			237
	Review Questions			238
	Vendor Profile Form Appendix			239
Chapter 15. Vendor Relationships and Agreements				250
	Lessor Obligation to Purchase Equipment			251
	Vendor Repurchase Agreements			253
	Developing a Vendor Program			256
	Vendor Program Checklist			257
	Vendor Program Agreement			261
	Summary			266
	Review Questions			267
Chapter 16. The Lease Transaction: Funding Overview				269
	Types of Leasing Companies			270
		Marketing groups		270
		Service companies		271
		Investing companies		271
	Market Focus			272
	Types of Credit			273
	The Leasing Sales Cycle			274
	Equipment That May Be Difficult to Place			275
	Summary			276
	Review Questions			277
Chapter 17. Funder Relationships and Agreements				278
	Assigning and Discounting Leasing Transactions			278
		Assignment		279
		Discounting		279
		A structuring caution		280
	Originator-Funder Documentation Issues			281
		Transaction type		281
		Financial transaction		282
		Buy-back and indemnity obligation		282
		Legal requirements		283
		Documentation responsibilities		283
		Representations and warranties		284
	Representations Requested by Funders			284
		No assignment		285
		Marketable title		285
		No default		286
		Obligations performed		286
		Correct and complete lease		286
		Complete statement of lease receivables		287
		Adjustment to or amendment of lease		287
		Credit information		287
		Rebrokered leases		288
		Equipment delivery		288
		Sole funding source		289
		Fraud; bona fide lease		289
		Full force and effect		290
		Authorization		290
		New equipment		291
		Compliance with laws		291
		Bankruptcy of lessee		291
		Full disclosure		292
		Completeness of list		292
		Further information		292
	Summary			293
	Review Questions			293

Index				295