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Archives May 16, 2000--Resource America Announces
James Durbin wows 30,000 in Santa Cruz
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Archives May 16, 2000--Resource America Announces
" Operations for the discontinued small ticket equipment leasing business resulted in an after tax loss of $157,000 and after tax income of $453,000 for the quarter and six months ended March 31, 2000 as compared to after tax income of $1.3 million and $1.5 million for the quarter and six months ended March 31,1999"
"-- On April 13, 2000, the Company announced that it had entered into a preliminary agreement to sell all of the stock of its wholly-owned subsidiary, Fidelity Leasing, Inc. ("FLI") to European American Bank for a combination of cash and notes, including the repayment of FLI inter-company debt to the Company.
Crit DeMent, president/COO (1996-2000) and Miles Herman, VP, of Fidelity Leasing remain with Resource America, and in 2001 DeMent becomes Chairman and CEO of LEAF Financial (a wholly-owned subsidiary of Resource America, Inc.)
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Get Linked In---
The social media frenzy for business to get involved in “or else”---reminds me very much of the Y2K2 frenzy right before the turn of the century: everyone supposedly had to do something about it right away or the computer world as we knew it would come to an end. It was all hype! Just like your business must get aboard Twitter or Facebook or you will be left out!
LinkedIn.com is a completely different concept for business, and should be seriously considered, in my opinion, for business use.
The social media sites should remain “social.”
While advertising and promotion of products, perhaps services, can be likened to what has made Google popular to business, the social media can be best seen as a television show with commercial popping up, often aimed at specific users; as Amazon was one of the first to define repeat users who came back to their web site. If you bought this before, you are interested in this, if you are a chess player or have a dog, you are interested in this. The advertising is specifically aimed at you and your interests. Google brought this to the browser wars.
The fact here is the “social” blogs are not “business” blogs.
First, Twitter, Facebook, and the many like them, have limited use as once you start popping your ad or press release on, the user then blocks you for life. It's like having the ability to turn off commercials of specific products on your television. They may advertise one time, but that's it! One of the advantages of many television recoding devices is often commercial are deleted so you can see a show in often in less than 40 minutes than 60 minutes.
Twitter and Facebook among others are first a social blog, a group of friends who share experiences, photographs, and often limit who can view what is posted. They also may be fans of a singer or entertainer or a product that they enjoy and want to be informed of the latest news---but most of it is personal---not business related. They would be classified as "consumers." They are excellent programs and growing worldwide---for “consumers” primarily. They may be for the use of followers of a product or singer or movie star, but it is “social.”
The difference is Linkedin.com is designed primarily for businesses, meaning not just entrepreneurs, but those seeking information, products, services for their business, as well as those looking for a job or a better position than they presently have in employment. It is for "commercial" use.
If you will, look at one as "consumer loans" and "commercial loans." Quite different, and that is what Linkedin.com offers.
The key is networking which is one of the main purposes of leasing associations, but here you don't have to get on an airplane, rent a hotel room, or even leave your house. You can join a group or groups or start your own and network---meaning if you are looking for information, want to share information, or promote your services, make friends, find customers, all you need to do is participate.
What makes it even more useful is like the "Six Degrees of Kevin Bacon." The concept rests of the assumption that any individual can be linked through his or her film roles to actor Kevin Bacon within six steps.
At Linkedin.com, the connections are noted along with the relationship person, and become a reason to include a person in your network or join their network. In fact, it is actually even more sophisticated as you not only get this information, but can view their profile and other connections.
In the Linkedin.com method you can do this for free or join any of the tiers, depending on your purpose. Remember, in any of these internet sites, and it goes back to AOL the first with chat rooms, blogs, even free web sites (all they had was dial-up and were one of the last to get into broadband, but that is another chapter.) The key point is the originator is the one in control of how they use their profile, their "page," or group or participation in group(s).
Many groups are wide open, many also want to qualify members who join, as well as many may also pre-screen discussions, meaning allow or not allow specific discussions, especially if unflattering.
You can join as many groups as who will have you. You can also leave them if you find them too full of "commercials" or a waste of time. You can set information for daily, weekly, or whatever time period you want as well as put other perimeters, including accepting people into your network or rejecting them.
Many of the groups are dominating by those who want broker, lessor, vendor business, or those with specific transactions where they are looking for help or a better rate of return. Of course, you don't know about either party until after the transaction takes place, although you can look at their web site, look for references, view their profile and thier references, as well as the people in their network.
If you have not joined, I recommend that you do, as it is "free." And don't forget to upload a photograph so people can see who you are!
FASB Leasing Changes will be good for Leasing
For those who forgot what they learned in Leasing #101: “It is the use of equipment, not ownership” that is the fundamental reason to lease. This means the concept is not to own, but to be able to use, meaning the latest, most efficient, most productive, more profit making equipment. Possessing old, out of date, less efficient equipment is not the goal. Making a profit and controlling cash flow utilizing the best equipment available to do so is the goal, especially at the best monthly cash outgo as possible.
The idea behind this is not to own the laptop or computer in three or five years, or IPod 1 or IPhone model 1, or worn out copier, or out of date equipment. It is to put the user in the position of getting the latest model, up-to-date equipment, or letting the user decide when it is time to up-date or perhaps even purchase for the long term what they have been using. The idea is to be more competitive.
This concept of “use” rose above other issues, although included tax issues, cash flow, or cost of money, although all were important, including convenience. They certainly should be considered, but the goal was to be able to use the equipment rather than want to “own” it. No money down, lower payments, easier to acquire made leasing very popular. Cash Flow.
Even small ticket users of equipment might not want to keep the equipment after three years or five years of use, or even one year or two years, depending on how they budgeted their cash flow and the value of up-dating what they were leasing.
Perhaps the earliest use of this concept was leasing a car that you could return because you wanted a new one, or a large piece of equipment such as a mainframe computer or harvesting machine that you knew in three years there would be better, more efficient, and maybe even less cost cash flow as prices in certain fields went down, such as computers and laptops, just to name one, as the price or ram, storage, and speed seems to come down every three to six months.
So understanding this basic philosophy, the changes in lease accounting are going back to the fundamental. Those who realize this can take advantage of it. First will be the captive lessors and those who structure for the return of the equipment. But those who realize the changes can take advantage of them in the leasing models and sales presentations.
It appears that the GAAP rules will eliminate off balance sheet operating leases in the near future. That is with the exception of leases for 12 months or shorter. The current protest papers have objected to the crystal ball effect of requiring the present value of renewal options if there is any thought of accepting the option. While it is true that if they are compelled to renew then it should be included in the present value requirement at lease commencement. However they seem to be on the verge of eliminating the “what if” requirement. Therefore I suspect there will be 12 month leases with the following requirements:
Let’s say a typical true lease over 60 months on $100,000 with a 12% residual, one payment in advance, monthly payments in advance on a depreciation term class of 15.000, and a MISF yield of 10% would yield a payment of $1,887.80. The new GAAP rules would require this lease to be placed on the balance sheet for the present value of the rent stream, discounted at the lessee’s incremental borrowing rate.
To make this lease an “off balance” sheet lease the maximum term would have to be: 12 months---allowing the lessee to return the equipment. Therefore, the lessor would have to accept the risk that the sale of the equipment would not bring the remaining investment or unpaid balance. There are to pieces to this risk. The first is the tax effect that makes the recapture of federal income tax an “add on” to the payoff to come out whole or the dilemma of re-leasing the equipment to avoid the tax consequences but losing the protection of the “finance lease” provisions of Article 2A. The actual value of the re-lease may reduce the risk, but it requires additional costs and time to secure a new lessee. Also it would only work on assets that maintain their value over the life of the lease.
A possible solution to the short term risk of the difference between the stipulated loss value at the end of each 12 month term and the equipments wholesale value may be to implement some additional requirements:
The restocking fee would be considered additional rent if the equipment was returned but would be a non event if the lease was renewed for another 12 months.
If the restocking fee is not acceptable then the rent requirement would reflect the actual loss in value of the equipment each year. The first year you would subtract the predicted wholesale value one year out from the cost and create a rent to accomplish the reduction in value keeping in mind that the tax effect would require a higher payment to cover it at the end of the year. Then create the rent stream each year for the full five years. Again the notice period and the condition of the equipment upon return need to be included.
Clearly this type of structure becomes very difficult as you lease equipment that has a limited market or has its value decrease very rapidly. Equipment studies for return language and yearly values will add a new dimension for lessor’s to consider in the future.
It will be an interesting question on how a $1 lease is handled if it follows this same structure with a 12 month term offering renewals with a restocking fee or decreasing rents over the five year term as the loss in value slows down.
Solutions to these types of structures are always a part of being in this industry so put your thinking caps on and try to view how to approach the future. This is only one solution and it remains to be seen if the accounting rules will allow it to happen.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at firstname.lastname@example.org or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
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The Main Reason to Lease
Top Stories May 9--May 13
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(5) Shivers Secures $25 Million Line with Wells
(6) Leasing 102 by Mr. Terry Winders, CLP
(7) Sales makes it Happen---by Christopher "Kit" Menkin
(8) Resource America/LEAF Financial---Trend Continues Down by Christopher Menkin
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### Press Release ##############################
The Alta Group and Invigors Form Invigors EMEA to Expand Global Consulting
RENO, NEVADA, -- The Alta Group and Invigors – premier providers of equipment leasing and asset finance advisory services – today announce that they have formed Invigors EMEA LLP as part of The Alta Group, a global consultancy.
Invigors EMEA combines the wide-ranging complementary skills and geographic coverage of the former businesses in Europe, the Middle East, and Africa, augmented by the powerful team of leading advisors that constitute Alta worldwide. This uniquely positions Invigors EMEA within the region and will strengthen the services that it offers to its clients and those of The Alta Group worldwide, which include many of the world’s leading lessors, asset finance companies, equipment manufacturers, vendors and service providers.
“The demand for global knowledge and resources has never been stronger in our industry,” said John Deane, the CEO and a principal founder of The Alta Group 20 years ago. He said many industry leaders are realizing that business models must change in order to foster growth, particularly after the deep recession, and meet the challenges of fast-changing technology and a new regulatory environment.
Invigors EMEA provides a broad and comprehensive array of strategic support services that include consulting; corporate restructuring; strategic marketing; research; legal support services; mergers and acquisitions; tax, regulatory and accounting services; business process re-engineering; sales performance management; learning and development; and vendor and captive programs.
Invigors EMEA has seven UK-based Partners - Chris Boobyer, Richard Guilbert, Malcolm Ogle, Mike Roberts, Richard Ryan, Marc Tendler and George Tonks, together with strong business relationships throughout EMEA, including Benelux, Central and Eastern Europe, France, Germany, Italy and Spain. It intends to increase its pan-European coverage in the near future.
Invigors EMEA comprises highly experienced, senior executives with many years of practical and strategic experience across the equipment leasing and asset finance spectrum and who are recognized as some of the most knowledgeable and thoughtful experts in the global industry.
This strategic step is further progress in the expansion of the global consultancy with local resources. All of Alta’s regions are closely aligned and are now coordinated by a worldwide Management Committee with members from the USA, Canada, China, EMEA and Latin America.
Chris Boobyer and Malcolm Ogle, Invigors EMEA Partners, explained the rationale for the new partnership: “Many of us have had a competitive business relationship for a number of years and we are delighted to now have this opportunity to combine our knowledge and skills to enhance our portfolio of services to our many clients as part of The Alta Group, with its unique, specialist and global capabilities,” Boobyer said.
“We are optimistic about the industry’s future, both in EMEA and in the regions that The Alta Group serves,” Ogle added. “The Industry’s needs are changing and our strengthened presence in EMEA comes at the right time in this developing economic cycle. We are actively planning for the future and gearing up to provide the resources necessary for clients to achieve their local and international goals."
Questions and Answers
Q: What is the rationale for combining the businesses?
Q: Why launch now?
Q: Why the choice of name?
Q: What is the structure of the business?
The UK Partners are: Chris Boobyer, Richard Guilbert, Malcolm Ogle, Mike Roberts, Richard Ryan, Marc Tendler and George Tonks.
Q: How can two businesses which were previously major competitors now work together?
Q: How does it fit with other Alta regions?
Q: What advisory services are offered by the business?
However, the depth and detail of its expert knowledge goes far beyond these headlines and this geographical scope. With the support of the powerful Alta global team of leading advisors, Invigors EMEA is ideally positioned to provide the advisory and consultancy resources necessary to meet local and international challenges today and in the future.
Q: Is the business planning to grow?
Q: Is there a Chairman, Managing Partner or spokesperson?
Alta Spokespersons Worldwide are:
North America: John Deane
Q: When was this combined business structure officially launched?
For more information please visit:
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