Winery Expanding Manufacturing through Equipment Leasing with TEQlease Capital
Oak Mountain Winery, located in Temecula, California, has recently secured equipment lease financing through TEQlease Capital for new champagne tanks and will also be adding new bottling equipment. With the new equipment in place, Oak Mountain Winery will be expanding their winery business even further and will be offering their winery manufacturing services to three local wineries. You can learn more about the wines they offer at http://www.oakmountainwinery.com/.
Banks More Competitive For Commercial Loans
A quarterly survey of senior loan officers by the Federal Reserve found that in the April survey, a “modest” number of banks reported having eased their lending standards and having experienced stronger demand over the past three months. Standards on commercial loans to large, middle-market firms, and small firms, were about unchanged. However, a “moderate” number of banks eased many terms on commercial loans to firms of all sizes, with most indicating that they had done so in response to more aggressive competition from other banks or nonbank lenders. Fewer than half of the banks that reported having eased standards attributed the change to an improved or less uncertain economic outlook.
Banks also reported an increase in demand from firms of all sizes, for the second straight survey. Banks also reported that the number of inquiries from potential business borrowers regarding new or increased credit lines increased. Banks reporting stronger demand cited shifts in borrowing from other bank and nonbank sources, as well as increases in customers’ funding needs related to inventories, investment in plant or equipment, accounts receivable, and mergers and acquisitions as important factors underlying the increase. Banks reported that their credit standards on commercial loans to both large and middle-market firms and to small firms were little changed over the first quarter of 2012.
It is no secret: banks are competing for high grade loans, and rates are low. While this continues to be good news for high grade borrowers, less-than-perfect borrowers are seeing only little relief. Now if I could only figure out how many banks constitute a modest versus a moderate number as far as the Federal Reserve is concerned…and credit crisis solved.
Tablets Quickly Becoming Primary Computing Devices
By 2016 there will be 760 million tablets in use globally representing a 46% compound annual growth rate, Forrester Research forecasts in their just published report “Tablets Will Rule the Future Personal Computing Landscape.” That’s pretty dramatic growth considering that in 2011 56 million tablets were sold.
Why the rapid growth in the tablet market? According to Forrester’s Frank Gillett, “Tablets aren’t the most powerful computing gadgets. But they are the most convenient.”
Gillett explains:
They have longer battery life and always-on capabilities better than any PC — and will continue to be better at that than any ultrathin/book/Air laptop. That makes them very handy for carrying around and using frequently, casually, and intermittently even where there isn’t a flat surface or a chair on which to use a laptop.
And tablets are very good for information consumption, an activity that many of us do a lot of. Content creation apps are appearing on tablets. They’ll get a lot better as developers get used to building for touch-first interfaces, taking advantage of voice input, and adding motion gestures.
Forrester goes on to forecast that by 2016 one third of all tablets will be purchased by businesses and we will “see a very different computing landscape, with tablet adoption having had a dramatic impact on PCs.”
These predictions are probably not a surprise to many small businesses and schools that are already using tablets for many of their business functions. The Street recently reported on the growing using of tablets by small businesses in their article “Why Every Small Business Needs an iPad”. According to Mike Pugh, vice president of marketing at j2 Global:
Credit card processing off a mobile device is a great way to be able to do business in a variety of different settings. Using the camera in the device to be able to do both taking pictures and video. For someone who has remote offices, video conferencing can be a fantastic way to maintain contact with customers or employees. Using the camera is also great way to do documentation; essentially it serves as a scanner that can document insurance claims or for interior designers to be able to take pictures of different environments.
What are we seeing? We have seen an uptick in schools leasing tablets for the 2012/2013 school year especially since Apple’s launch of the new iPad.
What questions do you have about leasing tablets for your business or school? Please contact us and we will walk you through the options.
12 Recommendations for Leasing Tree Care Equipment
The last four years have been tough on the tree care industry, but as consumers and businesses begin to return to spending, it’s a good time for tree services companies to take stock of their equipment needs and financing options to make sure they are primed for the return of discretionary expenditures. With limited budgets during the Great Recession, many tree services companies have delayed capital expenditures for high ticket items including wood chippers, stump grinders, ground units, aerial chip dumps, and telescoping tree trimmers. However, with a pretty consistent flow of positive economic news for both consumers and business, we see this changing in 2012.
If you are also considering acquiring new equipment, and want to conserve available cash, leasing may be an appropriate solution. However, before finalizing the purchase or lease of needed tree services equipment, I recommend that companies carefully consider the following 12 tips so they don’t make any costly mistakes.
- Understand your business credit and organize your financial information before contacting an equipment lease financing provider. Make sure you understand your credit score, your business financial picture, and any discrepancies that might be on your personal credit report or Dun & Bradstreet business credit report.
- Do the math and determine whether the Section 179 deduction and bonus depreciation will benefit your business or not. Section 179 allows businesses to deduct the cost of qualifying businesses equipment placed in service in 2012 up to $125,000. In 2013, the deduction will drop significantly to just $25,000 unless Congress acts. Also, get advice from your tax advisor about the acquisition.
- Determine whether equipment purchases should be made in cash, or whether lease financing makes sense to conserve capital. Do a lease-versus-buy analysis.
- Don’t assume your bank or the equipment manufacturer’s captive finance company will offer the best terms. The majority of equipment leases are done by equipment lease providers, and often at better pricing. Always compare rates, lease terms, fees and options.
- Do due diligence on your proposed financing provider. Once you have a short list of providers make sure to check them out thoroughly. Go to Google and run a search on them. Also run a search on social media sites like Twitter. Work only with established financial solution providers.
- Don’t pay upfront “application” fees to a bank or equipment financing provider.
- Be prepared to explain in advance any negative business results to a lease financing provider. For example, if you had a business loss in 2010 explain why. If you recently won a major contract, explain that too, even if the new business hasn’t yet affected your business results.
- Understand the difference between a Fair Market Value Lease and a $1 Purchase Option Lease. A Fair Market Value (FMV) Lease is one of the most common leases that businesses select because it offers the lowest monthly payments, provides the greatest flexibility at the end of the lease, and may also provide tax incentives. A FMV lease is often used for acquiring technology equipment. On the other hand, a $1 Purchase Option Lease gives businesses the ability to “purchase” equipment for a $1 at the end of a leasing period. The monthly payments are higher than a FMV lease. In addition, you may have additional financial benefits including depreciation and/or interest expense benefits for tax purposes under either scenario.
- Describe to the equipment lease financing provider how the equipment acquisition will benefit your business. Provide a projection of cost savings or incremental realizable margins if you have one. Obviously there is a reason why you want to acquire new equipment. Make sure your equipment lease financing provider understands exactly what this reason is.
- Consider bundling multiple equipment acquisitions from different vendors under one lease with an independent commercial equipment lessor. Rates tend to be higher for smaller transactions. Bundling equipment acquisitions generally results in lower rates, is simpler to administer and account for, and also minimizes processing fees.
- Ask your equipment vendor for payment terms so you can defer a portion of the equipment cost, and coordinate deposits, progress payments, and performance retention payments. Most equipment vendors will ask for a downpayment, with the balance due either at delivery or with ten to thirty days after delivery.
- Be careful of earnest money payment requests. An earnest money payment is sometimes required equal to a fixed amount or one month’s rent as a refundable application fee. The earnest money payment can be called an application fee, deposit, due diligence fee, etc. If the lease transaction is approved, the earnest money payment is applied to the first or last rental payment due under the lease. If the lessor declines the lease transaction, the earnest money payment is refunded, but sometimes, if specifically agreed in the lease proposal, a small portion of the earnest payment may be retained as an application or processing fee. Not all lessors require an earnest money payment.
5 Things You Need to Know About a Master Lease Agreement
U.S. companies are ramping up borrowing and signed up “ $5 billion in loans, leases and lines of credit in February, 22 percent more than the $4.1 billion a year earlier” according to the Equipment Leasing and Finance Association (ELFA). Much of that new spending is concentrated on technology. With increased interest in replacing aging equipment and acquiring new technology to increase productivity, many businesses are researching equipment leasing to stretch their budgets further.
If your company is one of them, there are five things you need to know before signing a master lease agreement.
- A master lease agreement is a governing agreement that may include a number of equipment schedules under it. It can be viewed as an umbrella agreement that a company leasing equipment may use to acquire additional equipment over time with the same lease funder without having to execute a new lease each time.
- Under each master lease agreement, there is a separate equipment schedule agreement that lists equipment leased, terms of the lease, pricing of the lease per equipment schedule, and end of lease options. If a company acquires equipment at two separate times for example, there would be two separate equipment schedules but only one master lease agreement.
- The end of lease terms on the separate equipment schedules that fall under a master lease agreement may be different.
- All the other terms –except end of lease– of the master lease agreement are incorporated into the equipment schedule.
- Once a master lease agreement is in place, a company does not need to renegotiate terms with a lease funder each time it adds a new equipment schedule to the master lease agreement. A master lease agreement speeds the process of acquiring equipment.
If you have any questions regarding a master lease agreement and whether it is right for your company please contact us.
Schools Can Stretch Their Budgets by Leasing IT Equipment
It’s not a secret that school systems across the country have been struggling with their budgets over the last four years. Unfortunately, many schools have been forced to continue to use aging and outdated equipment for financial reasons . However, by carefully weighing the pros and cons of leasing IT equipment including desktops, tablet computers, iPads, servers, laptops, wireless networking solutions and more, many schools may find they can stretch their budgets further and get the equipment they need now by leasing.
Here are issues to consider in the lease-versus-buy analysis:
- There is an implicit cost of money component to leasing which should be factored in to the analysis. Obviously leasing isn’t free. However, today leasing certainly is cheap. With interest rates at historic lows, a school districts cost of funds is also very low, making the decision to lease often even more attractive.
- Leasing is a good way to stay current and refresh technology. With a lease with a $1 purchase option, the IT equipment tends not to be refreshed. But with a lease with a fair market value purchase option, the refresh decision has to be made.
- Consider fair market value leases (which tend to be cheaper) for equipment with a limited useful life (like notebooks), but $1 purchase option leases for IT infrastructure.
- Ideally, negotiate an end-of-lease option that allows a purchase option for some items but not others – defer the decision so you can truly evaluate the equipment throughout the lease term.
- We find that many students want to buy their notebooks at the end of the lease rather than return them, even if the notebooks are 3-4 years old. Some students don’t. Negotiate a fixed price end-of-lease option for this if you can.
- Be careful of extended warranties. Some don’t cover liquid spills, cracked screens and drops.
- In almost all cases we recommend that schools customize lease terms. Most leasing companies—including TEQlease Capital–can and will provide a leasing solution customized for what your school needs.
What questions do you have about leasing? Please contact us and we will walk you through the options.
Consumer Confidence at Highest Level Since 2007
Regardless of high gas prices, U.S. consumers are more confident about the economy than they have been since late 2007, according to the latest consumer survey by Thomson Reuters/University of Michigan.
The survey also reported that more households are describing the most improved financial situation in the last four years and are the most optimistic about employment prospects. Perhaps even better news for businesses, the data from the survey indicates “inflation-adjusted personal consumption expenditures can be expected to grow by 2.3% in 2012.” Consumer spending drives two-thirds of the economy.
The U.S. Commerce Department also weighed in and said “personal spending rose by a bigger-than expected .8% month over month in February, the largest monthly rise since July.”
All the upbeat consumer news is tempered by a warning from the survey director Richard Curtain, “Gas prices of $4 are no longer shocking, if they approached $5, the impact would be widespread and substantial.”
TEQlease Capital Secures More than $1 Million in Lease Financing for California Poultry Farm
TEQlease Capital is very pleased to announce we have recently secured more than $1 million in lease financing for one of California’s largest poultry farms to use to acquire cage-free hen housing. With this lease financing in place, the poultry farm will be able to more than double its egg production, thereby increasing its profits and expanding its ability to supply organic eggs to one of the nation’s largest food retailers. In addition, with its state of the art cage-free system, the poultry farm now not only meets but exceeds California’s Proposition 2 law mandating humane standards for farm animals, and it has met the requirements of the law well ahead of its 2015 deadline.
Personal Cloud Will Replace Personal Computers by 2014
If the launch of the iPad didn’t cause enough of a stir with predictions of the imminent demise of the personal computer, Gartner recently announced, “the reign of the personal computer as the sole corporate access device is coming to a close, and by 2014, the personal cloud will replace the personal computer at the center of users’ digital lives.”
Questions to think about include how will this impact your business, the products and services that you deliver, and whether your business will be ready?
According to Steve Kleynhans, research vice president at Gartner, “Many call this era the post-PC era, but it isn’t really about being ‘after’ the PC, but rather about a new style of personal computing that frees individuals to use computing in fundamentally new ways to improve multiple aspects of their work and personal lives.”
The consumerization of IT has been taking place for nearly a decade. However, Gartner believes the next wave is starting to place as the following factors come together:
- Users are more technologically savvy and have very different expectations of technology.
- The Internet and social media have empowered and emboldened users.
- The rise of powerful, affordable mobile devices changes the equation for users.
- Users have become innovators.
- Through the democratization of technology, users of all types and status within the organizations can now have similar technology available to them.
How will your business respond?
Manufacturing Up, Beating Expectations Again
The U.S. manufacturing sector’s expansion continued in March and employment perked up, according to data released today by the Institute for Supply Management, indicating mildly expanding activity. The ISM sub-indexes last month improved also. The new orders index increased, as did the production index, the factory employment index and the inventory index. However, construction spending decreased by 1.1% –the biggest drop since July.
We watch the ISM index to gauge the economy’s performance. However, a much more useful indicator for us is what our customers tell us. Typically, in a positive economy, our manufacturing customers acquire equipment in anticipation of demand, or to take advantage of new technologies and efficiencies new equipment can deliver, or to replace old equipment on a regularly scheduled basis. In today’s economy however, customers have to be more reactive, acquiring equipment only when ROI is absolutely compelling or to replace equipment well beyond its useful life. Activity in a sector will also factor into credit approval decisions. Because the manufacturing sector is on the upswing, lenders and lessors view manufacturing customers more positively. This is in contrast to the construction sector, causing construction sector companies to find credit harder to get.
ISM also reported that spending on construction projects in the U.S. fell for the second consecutive month. Private nonresidential construction–including office, commercial and infrastructure building–drove the decline, falling 1.6%. The building industry suffered greatly during the financial crisis, shedding more than 2 million jobs between 2006 and 2011. But more recently, the sector has somewhat regained its footing, adding nearly 100,000 jobs in the past year as construction projects have restarted in many areas of the country. A glut of cheap, foreclosed homes still on the market is keeping interest in new homes in check. But a report last month showed demand may be picking up as building permits reached their highest levels in nearly 3 1/2 years.
