“Access to Capital”

Swann and Fleming Telephone Press Conference

by Kit Menkin

Equipment Leasing Association President Michael Fleming and Global Insight Senior Consultant Christopher Swann, Ph.D. unveiled the results in a  telephone press meeting yesterday morning on the “Economic Contribution of the Equipment Leasing Industry.”

The first part concerned the background of the report, and its significance,

but the second part, question and answers, in an auditorium chat forum

procedure, one at a time, all seemed to center around the so-called “leasing

tax abuse” in the U.S. Treasury budget suggestions centered around what

they coin “Silo,” a word they made up, according to Michael Fleming.

The transactions are really sale/leasebacks to tax exempt entities. A lot of the

criticism from  the congressional committees now seems to be on bank balances being required in the transaction. Those requiring like compensating balances in the bank are “unfair.”

At risk is anywhere from $10 to $15 billion from the $300 billion

spent yearly in leasing.  The number from $10 to $15 billion could

be interpreted differently, they both said, due to real estate being

involved, plus “out of the United States” collateral.

This $15 billion number appears not to mean that much on Capital Hill

in the course of the budget, Fleming explained, but if your business, your product,

your services were part of this dollar amount, it would be significant to you.

Fleming had to go back to the basics for many of the questions, almost

as if he were a salesman explaining leasing for the first time to a prospect.

He also went into the granting of credit, requiring personal guarantees, a co-signer,

co- corporate guarantor,  collateral, and other secondary sources of re-payment.  He did an excellent job.

The questions asked and reaction by the media were very good examples

of what he was facing “on the hill;” particularly the difficulties he has

to overcome to explain that he sees this as a policy issue.

He did not see any “tax abuse,” as “there is nothing hidden or prohibitive”

in these large government or municipality “sale/leaseback transactions...They follow

the rules and all the laws,” he added.

“What should be relevant to tax deferment or tax exemption is the ability to acquire

modern equipment and capital, “ he said. ,”A good policy” was his goal. Both

government and the private sector need access to capital, now more than ever

before, was his main message.

He explained the basic concepts of “like kind” exchanges, the value of a lessor

utilizing depreciation either for a better “rate” or “ incentive” to grant approval

to a higher risk credit, and the basics of providing access to capital for not

only municipalities but also for both large and small businesses.

The purpose of the press conference began with Dr. Christopher Swann explaining

the significance and procedure of the 41 page report, particularly to look at

the industry and its affect during the recent various changes of the economy.

Fleming in explaining to “business reporters” perhaps summed up the report

best, saying, “ Al kinds of equipment are lease...Leasing is a mirror

of the economy, technology and non-technology equipment, all things,

all industries, all sizes, by small and large businesses.  A new start-up

or a franchise, the first thing they want to do is lease.”