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.

  1. 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.
  2. 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.
  3. The end of lease terms on the separate equipment schedules that fall under a master lease agreement may be different.
  4. All the other terms –except end of lease– of the master lease agreement are incorporated into the equipment schedule.
  5. 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.



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?

How to get your financing approved

Michael Lockwood, President of TEQlease Capital, wrote an article for Up and Running Blog that was published today titled “5 tips to getting small business financing “. We are including an excerpt from that article below.

It’s no secret that small businesses have had a hard time getting financing approval for nearly four years. But according to the latest Wells Fargo/Gallup Small Index –a quarterly survey of small business owners nationwide – small business owners are now more optimistic about getting credit than they have been since July 2008. According to the report, 28% of U.S. small businesses plan to increase their capital expenditures in 2012, the highest rate it has been in four years. And perhaps most importantly, 24% of small businesses have already started increasing their capital expenditures for 2012.

With optimism for gaining financing spreading, the question for many is how to best approach lenders to maximize the chances of getting a credit approval. Here are five keys for small businesses to get approved.

  • Demonstrate that your business generates steady cash flow. Cash is still king and is also a key predictor of a business’ health and prospects for the future. By being able to demonstrate you have ample and/or steady cash flow, you are ensuring to potential financers that you have plenty of money to pay creditors, employees and others on time.
  • Maintain a manageable debt load. Debt load is the amount of debt that is carried on your balance sheet. You need to be able to demonstrate you can not only handle your current debt load but also the additional debt repayment your proposed financing will cause. If you want to incur the debt for expanding your business be prepared to demonstrate why this additional debt will be beneficial.
  • Sustain a positive payment history. One of the most important factors for any financer to weigh is a business’ payment history. A financer needs to see that a business has a record of paying down debt, and on time.
  • Prove business judgment. Potential lenders want to be assured that you anticipate potential challenges and have a plan in place as to how to address these challenges. Furthermore, lenders are also interested to see that you have the management in place necessary to overcome any obstacles that might come your way
  • And of course, shop around for financing. Don’t assume your bank or the vendor will offer the best terms.  Compare rates, lease terms, fees and options and use only established financing providers.

If you have any questions, please contact us.


5 Tips for Replacing and Financing Technology Equipment

This week Michael Lockwood, President of TEQlease Capital, wrote an article for Up and Running Blog titled “10 Things to Consider before Replacing Business Equipment“. We are including an excerpt from that article below. You can read the entire article at the link referenced above.

With the end of the first quarter in sight and with economic indicators continuing to look positive, many businesses may finally be ready to pull the trigger and replace their worn business technology equipment. Regardless of whether you are looking to move your business computing to the Cloud or to upgrade your computers, servers, smart phones or any technology equipment, before taking the plunge we recommend that business owners follow the tips below.

  • Carefully research the technology you are considering. Make sure to invest the time into reading reviews of the equipment you are considering from analysts and professional reviewers such as CNET, PC Magazine, Small Business Computing, eWeek and Consumer Reports.
  • Remember the cheapest solution may not be the best fit. If you are planning on keeping your technology for three years or more, make sure you opt for the “best solution” for your needs. Determine what it will be worth in 3 to 5 years.
  • Choose your equipment vendor wisely. With all the easy comparison shopping that is available online make sure to compare costs and warranties across multiple vendors. No one wants to pay a high cost and neither does your financier.
  • Understand Section 179 benefits. 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.
  • Carefully investigate your financing options. To learn more about equipment leasing and its benefits, you can read our post “Eight Equipment Leasing Tips” or contact us .

Considering Leasing for Your Capital Expenditures?

Over the next 12 months the percentage of U.S. small businesses that plan on increasing their capital spending is 28% according to the Wells Fargo/Gallup Small Business Index. That’s the highest rate reported in four years.

If you are looking into increasing your capital spending and considering leasing, the first thing to understand is the three most common types of leases: Fair Market Value Lease; $1 Purchase Option Lease; and 10% Purchase Option Lease.

A Fair Market Value (FMV) Lease is one of the most common leases that businesses select in part because of its flexibility. Businesses often select a Fair Market Value lease if the equipment they are acquiring, such as technology equipment, rapidly loses its value once it is placed into operation.

Fair Market Value (FMV) Lease:

  1. Offers the lowest monthly payments. An FMV lease is ideal for businesses that want the lowest possible payments and are unsure if they want to acquire the equipment at the end of the lease.
  2. Provides tax incentives.  Businesses may be able to deduct the monthly lease payments as an operating expense deduction.
  3. Provides the greatest flexibility at lease end. At the end of a FMV lease a business can decide to return the equipment, continue to pay for and use the equipment per your agreement with the lease finance company, purchase the equipment or upgrade it with newer equipment.

A $1 Purchase Option Lease is another of the most common leases that businesses use to acquire equipment today. Each type of lease is useful, depending on the type of equipment and the type of anticipated use. A $1 Purchase Option Lease is often used by businesses or schools when they know they will still be using the equipment for an extended period after the end of the lease term.

$1 Purchase Option Lease:

  1. Provides businesses the ability to purchase the equipment for a $1 at the end of the lease term.
  2. Monthly payments are higher than a Fair Market Value lease because the lessee is now financing 100% of the equipment cost.
  3. Provides additional financial benefits that may include depreciation and interest expense benefits for tax purposes.

The 10% Purchase Option Lease is often selected by businesses who want to keep their options open to purchase the leased equipment at the end of the lease. This lease is most appropriate for businesses that aren’t ready to make a purchase decision at the beginning of their lease.

10% Purchase Option Lease:

1. The lessee usually may purchase the equipment at the end of the lease at a fixed price equal to 10% of the original price.

2.  The monthly lease payment will be lower than the $1 Purchase Option Lease but may be higher than the Fair Market Value Lease.

3.  Provides additional financial benefits that may include depreciation and interest expense benefits for tax purposes.

Not sure which type is best for your business? Please contact us and we will walk through the options with you.

How to Avoid Customer Backlash over Price Hikes

2011 was certainly a water shed year for customers taking to social media and other channels to vent their frustration over price hikes. Backlash from angry customers forced Verizon, Bank of America and Netflix to reverse their planned price hikes. We wrote about price hike push back from customers in our post “The Most Annoying Fees of 2011.”

However, with business picking up in many sectors, Rafi Muhammed writes in his article for the Harvard Business Review, Don’t Let Customers Freak Out Over Price Hikes”, “chances are that your company will consider a price increase this year.” Rafi is a pricing strategy consultant and author of The 1% Windfall: How Successful Companies Use Price to Profit and Grow.

According to Rafi, a CFO advised him, “The key is not to let a price hike become emotional to customers, because that’s when they become irrational and ultimately leave.” In order to avoid the backlash that Verizon, Bank of America and Netflix faced from their customers, Rafi recommends businesses follow the five tips below.

  • Employ Bedside Manners. Make sure to explain to your customers why you are raising prices.
  • Offer Choices. According to Rafi, customers don’t like to be “cornered” and are more agreeable if there is an “option to save money.”
  • Keep Your Word.  Again, customers will be more agreeable if you leave their existing deal intact and only raise prices “to new purchases and renewals.”
  • Emphasize Value. If you are offering a good deal even with the price increase, demonstrate to your customers how it is a good deal.
  • Everyone Else is Doing It. Let your customers know that competitors are also raising prices but again, show how your prices are a better deal.

Hopefully, by following these tips, when it comes time to increase your prices you will not be met with angry customers.

Frequent-Flier Beware: The IRS May Come Calling

Last month thousands of Citibank customers received “1099-Misc” forms informing them “that miles they received for opening accounts last year (2011) produced taxable income.”

The 1099-Misc forms were met by surprise and furor by many of the recipients. The Wall Street Journal reported :

“The tax issue was only hinted at in the offer,” says Keith Sipos, a retired music teacher in San Diego who received a 1099 with $750 of income for 30,000 miles. “When I asked to have the miles rescinded, Citibank said I should have asked by the end of 2011. But I didn’t know about the tax until I got the form.”

Unfortunately for many of the 1099 recipients Smart Money reported that according to analysts, “the actual trips booked with the miles can be worth less than the amount of income reported by the credit card company.”

Are your frequent-flier miles taxable? Here’s a brief run down on what types of frequent-flier miles are taxable according to the Wall Street Journal article “Frequent-Flier Tax Traps.”


  • Miles awarded as prizes.
  • Miles awarded for opening an account, such as a bank account.
  • Miles awarded for putting money into a mutual fund.

Non Taxable

  • Miles awarded by the airline for flying with them.
  • Miles awarded for credit card use.
  • Miles awarded for business travel.

Bottom line, consumers should concentrate their efforts on accruing frequent-flier miles through credit card purchases or through traveling and steer clear of mileage rewards by opening new accounts.