Operating Leases- A thing of the past- What the future holds…

By doing away with operating leases, new accounting rules could bring billions of dollars back onto balance sheets.
Accounting-standards setters are under fire, again. The new leasing standard, proposed jointly by the Financial Accounting Standards Board and the International Accounting Standards Board, has been characterized as naïve, lacking value, and in need of serious reevaluation. The outcry comes not from a handful of opponents but from companies on both sides of common lease contracts — those that rent office space, copiers, or airplanes and those that own the assets.
At the center of the maelstrom is the “right-to-use” asset concept, the accounting mechanism that places leased assets and liabilities on the balance sheets of lessees, as if they owned the assets. That would essentially eliminate operating leases. Credit Suisse estimates that, within the S&P 500 alone, the volume of assets returning to balance sheets could surpass $550 billion.
Read entire article http://www.cfo.com/article.cfm/14540137/2/c_14540453?f=most_read

What will 2011 hold for Equipment Finance?

Looking towards 2011 we are asking a lot of questions.  What will the equipment leasing industry do, how will it adapt? Will Money Come Back into Equipment Finance?

We are already seeing a large number of banks bid aggressively for middle-market and larger small-ticket transactions. Some of the national banks have been going up to $250,000 and $300,000 on an application-only basis for bank customers on equipment and industry sectors they like.

There are a few new entrants into the small-ticket application-only market, including the broker market (on a selective basis). This trend will probably continue in 2011 and pricing will be very aggressive on quality transactions.

This is a mixed bag for syndicators of transactions. On one hand, there will be more sources of capital available. On the other hand, there may be a large rate differential between walking down the street to Wells Fargo and getting financed at 4% and selling a broker transaction with points - so the syndicator world will continue to be predominantly "B" and "C" deals, not true "A" deals.

Lots of Smaller Banks will Continue to Fail and Shed Assets
The FDIC will begin to press weaker banks to shed assets and shut down now that there is ample liquidity in the overall system. As such, we see opportunities to purchase portfolios and leasing companies from banks next year. There will, however, be lots of bidders for those assets.  In general, we will see greater separation of the "haves" and the "have nots" in the funding world and the "haves" are going to be buying market share.

What will 2011 Hold?
We are coming out of a very deep recession, and tangible recovery is only just begging. For many leasing companies it is still going to be a difficult year. Overall equipment demand - especially for small businesses - is still weak (even though it is better). There are just not enough good deals to go around.  The next year is going to require huge amounts of hard work to be profitable.

More Competitive
Even small leasing companies are in a world market. Large companies like GE, Wells Fargo, Bank of America, Chase, etc. are constantly investing in new technology. These companies do collections from India at a much lower cost than small companies in the US. The large companies are run by smart people who are out to crush us all (Yikes!). In 2011 this trend will continue (as it will in 2012 and 2013 and forever). You had better be ready to compete.  You had better add some value or you are done.

Banks Will Still Be Banks
Having said that large institutions and especially banks are going to continue to be big competitors, there is an opposite side of the coin. The banks are struggling with increased regulation (unlikely all of it will be repealed even with a Republican House) and they are generally not interested in small, complex areas of the economy. Thus, we see that value will continue to be added by focusing on the complex and focusing on "niche" markets.

People Will Wake Up to Accounting Change
Radical accounting changes are coming. The smaller the borrower the less effect the changes will have. However, it will open up real opportunity for lessors willing to take big residual risk in the future as companies will be interested in shedding liabilities from the balance sheet. We will be back to having lessors who are actually in the equipment business. Change will not likely come until 2013, but next year is only two years away!

Construction Equipment Financing

If you are in the construction business, most likely you’ll need to buy new equipment to keep up with growth, as well as purchasing equipment to upkeep and/or add to an existing fleet of construction equipment. Most businesses are not in the position to pay cash, and still have large operating funds left over. Now more than ever equipment lease financing offers huge tax advantages, bonus depreciation and flexibility for companies purchasing new and used equipment.

After you research and decide what equipment you need and whether you want the equipment new or used, now you need to decide if you will use a bank or equipment finance company. With the tightening on lending restrictions for banks, it proves to be more and more difficult to obtain financing on equipment.  So what options do you have?  Mazuma Capital has the flexibility to meet your needs when structuring leasing options for new or used construction equipment.
Even if you aren’t looking to purchase immediately, finding a reputable equipment finance company, such as Mazuma Capital  for your equipment financing is a good idea. Leasing is a great option that allows you to hold onto your available cash in case of a business emergency. Many people immediately think of their local bank branch when looking for a loan. Local banks can be a good place to begin, but a company that specializes in equipment financing will have more knowledge on equipment finance, and is a great option for more flexibility to meet your financial goals.
At Mazuma Capital we are committed to delivering superior service and competitive products at the lowest possible cost. We work with companies of all sizes across all industries to craft flexible, custom leasing solutions. From short economic useful life equipment such as telephony and computer systems to vital revenue generating equipment such as heavy machinery and medical equipment.
Please contact us today for additional information 801-816-0800 info@mazumacapital.com.  Visit us 24/7 at http://mazumacapital.com/

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