This financing option contemplates a lease in which the Lessor is the legal owner of the equipment and is entitled to claim all the tax benefits of ownership (depreciation and interest expense) and the Lessee expenses the lease rental payments as a cost of doing business. At lease expiration, the Lessee has the flexibility to purchase the equipment for its fair market value, renew the lease of the equipment for the fair market value rental rate, or return the equipment to ATEL without further financial obligation.
This form of financing consists of a true (tax) lease with a shorter lease term than the depreciable life or economic useful life of the equipment. To qualify as an operating lease the structured financing must satisfy FASB13 Accounting Standards for operating leases with particular emphasis on the 90% test where the NetPresent Value ("NPV") of the rental stream, when discounted at the Lessee's incremental borrowing rate, must be less than 90% of the original equipment cost. The Lessor "books" and depreciates the equipment as an asset and the Lessee expenses the lease payments over the life of the lease.
A convenient lease arrangement, usually involving a predetermined line-of-credit, which allows the Lessee to draw down funds for equipment acquisitions over time. A Master Lease Agreement is negotiated once up front and incorporates the same basic terms and conditions for those financing transactions that follow.
Under this alternative, ATEL Leasing Corporation purchases aged asset(s) from the Lessee and leases the equipment back for the desired length of time. The proceeds from the sale of the asset(s) can then be more effectively deployed by the Lessee for working capital, debt reduction, stock re-purchases, or new capital equipment additions geared toward enhancing productivity for the Lessee's business. In some cases, the Lessee is able to book a "gain" on the sale of the asset(s).
The leasing professionals at ATEL Leasing Corporation have the knowledge, tools, and creativity necessary to customize a program to meet your specific financing requirements. Let us work with you to develop a lease finance program that saves you time and money.
Executive Vice President, ATEL Leasing Corporation