ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: October 2008

Monday, October 27, 2008

Commercial v Consumer Leases for the Car

If you use your car primarily for your business, then you have a choice to make if you want to drive a non-American car (US auto makers don't offer consumer leases anymore) on whether to lease through the business or personally through a consumer lease. Some things the 2 leases have in common:

1) Reasonable monthly payments that allow you to get maximum car for your $$.
2) Purchase Option at the end of the lease period, usually 36 to 48 months
3) You can write off the miles on your personal tax return.

So if both types of leases have these 3 major factors in common, then whats the difference??

The biggest single difference is every $$ of every payment under a commercial lease is tax deductible as an operating expense for the business. This means the lease payment is expensed (shows on income statement as an expense but not on the balance sheet) and taken dollar for dollar off the revenue it generates for the business. So think of it this way, if you are going to lease a car anyway, you might as well maximize its effect on both your personal and business tax returns. There are only so many loopholes for the avg American that we can take advantage of and this is one of them.

Wednesday, October 22, 2008

Leasing the Company Car

Lately, companies are doing whatever they can to bring in clients. This often means driving more or even dedicating a car (or one of a fleet) just to going out to bring in new business.

Cars, specifically, and trucks and transportation more generally are one of the most common and best types of commercial equipment to finance/lease. Sole props, S Corps, C Corps, LLC, LPs and LLPs all qualify for leasing a vehicle through the business.

The US Auto makers have gotten out of consumer leasing entirely, however, many independents and other companies have a leasing program almost exactly the same as what they used to offer for clients that want to/are able to run the vehicle through their business. So the make and model of car of choice, as well as the dealer, become irrelevant and the client can choose whomever they wish.

Leases for transportation always include a purchase option, often qualifying them as an Operating Lease. This means among other things, maximum tax deductibility thus making it a great deal even for one person businesses.

Monday, October 13, 2008

Sources of Funds for Leases

My 23 sources of funds for leases have their own sources of funds which include:

1) Bank Lines
2) Warehouse Lines
3) Internal Funds
4) Investment $$ (from capital markets)
5) Investment $$ (from private individuals)
6) Other Finance Companies
7) Securitization and Syndication

The sources of funds are many and varied so while banks are a part of the first 2, they are not much of a factor in the other 5 and that's why these companies are staying relatively healthy in this marketplace so leases are still be written and in fact, more A paper leases are being written than ever before since banks are not lending to these customers the way they used to.

Tuesday, October 7, 2008

Equipment Lessors/Brokers Still In Business

I'd like to make an announcement this morning that nearly every equipment lessor and broker I know, including myself and my 23 funding source partners are still here and still in business and doing business. Sounds rudimentary I know, but considering what the marketplace is doing and the failures of seemingly strong financial institutions, I thought I'd just let everyone know.

An independent financing company like mine (Southern Lending Solutions, LLC) uses funding source partners. The 23 I currently use all fall under one of 3 categories:

1) Companies that started as brokers and lessors and became Funders
2) Independent subsidiaries of a bank (standard commercial or Utah Industrial Bank)
3) Publicly traded companies

All are doing just fine as none of my bank subsidiary funders are the large banks whose failures have been the big news of the last couple weeks.

All 3 types of sources use banks and bank lines for between 10-25% of their funds that fund our deals so as things have tightened on them, they have tightened on us. So it is a little more difficult to do business than it used to be. However, due to working with wide varieties of credits and the use of structuring, we can still get many deals done and while defaults are up across the board, the industry is still going strong.