Monday, January 9, 2012
Wells Fargo leapfrogs HSBC as largest Western bank
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What to Expect in 2012
The prediction comes from the past. Leasing News is perhaps known best for its “The List” that began in 2000.
An offshoot was started in 2009 to originally note the "funders" getting out of "indirect marketing," meaning not working with brokers and/or accepting new brokers. It grew into companies who were no longer in business. It does not include mergers or acquisitions, which would make it a longer list.
It was not meant to supplement "the List" started in 2000,
The trend continues to grow where independent, or as it is called, "indirect" business, is not accepted. Brokers for some reason have a very poor reputation. The latest is Puget Sound Leasing, now added to the list. Once built by brokers to the Secords, the entity now does not accept such business.
The three year thrust has been not favoring independents, but going after vendor direct as many bankers and captive lessors have referred to as "clean business." How this reputation was arrived at is more a "rumor" than a fact, as I tell bankers, vendors, distributors, manufacturers who both email and telephone, asking for a reference.
Many of the so-called funders are really "private label" non-recourse independents. Nothing wrong with that, but if you are a vendor, you want to know if you will get paid, do they have "Evergreen Clauses," "What is their reputation?," and it is not just the funders or captives, bur brokers who want to know as well as salesmen leaving a company and wanting to know if this is an "honest" company.
One trend I notice is more independent banks are getting into accepting leasing business, or setting up their own department, as evidenced not only by the telephone calls and emails, but registration for the news edition. The National Association of Equipment Leasing Brokers is aware of this and has an allegiance with the Independent Community Banks of America.
The Equipment Leasing and Finance Association is perhaps the best for independent banks to join with much information, support, and networking. While Leasing News has criticism regarding Evergreen clauses, the association is the leader in its field delivering not only information, but performing for its members. Leasing News has recommended to banks who have requested, they should join ELFA.
The trend continues toward cash advance, factoring, high payment a business loan, as well as insurance selling seems to attract former independents, who also have gone to work for "direct" funders. The move toward sellers of equipment going into leasing, meaning the opposite of salesmen leaving to go independent, but returning to the sellers in the leasing and finance department is still noticeable.
Not written about are companies like ATEL Capital, ICON, and the many others in this field, who have seen growth because banks have become timid due to increasing regulations. 2012 should be a very good year to attract investors.
This year will continue to see more independent banks entering the equipment leasing/finance field as it is a profitable product, especially with the low cost of funds and going rate of return. It also appears the trend continues for direct business, leaving those in the indirect business in a stronger position for their model.
2012 will be a good year for leasing and equipment financing. Now is the time to gear up for it.
Leasing Companies Out of Business
Companies with an * are no longer in business. The others are companies that were taking broker business, but announced that they no longer are accepting broker business. Many have also down-sized or are managing an existing portfolio.
More details are available in this list by company name:
*ABCO Leasing Inc., Bothell, WA
(Note: Should a company policy have changed, please contact firstname.lastname@example.org)
Funders looking for new Brokers:
"Broker/Lessor" looking for broker business:
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“Lease Consultant” vs. “Broker” or “VP, Mid-markets"
Last week's column centered on Congress not extending for 2012 the President Obama stimulus 100% bonus depreciation benefit (1), which results in a tax increase, affects the stimulus to acquire new equipment, and perhaps catches higher taxes in early disposal of equipment as per the IRS guidelines. The article, as does this, includes an abbreviated IRS tax guideline (2).
In the 1970’s until the middle 1980’s, those who made presentation to lessees were called “lease consultants.” Today they are either known as a “broker” or “vice-president, mid-markets” or “vice-president, transportation.” Few today call themselves “lease consultants” trained to understand financial statements, tax returns, and more important, “true leasing.” Accounting changes will not much change the directions of “capital leases” with bargain purchase options, but perhaps the “true lease” or “operating lease” may become as important. And to understand the fundamental, you must understand how depreciation benefits both the lessee, if they decide on a “capital lease,” or the lessor, if it is a “true lease.”
The document provided by the IRS for depreciation is sometimes hard to understand the first time you see it. Prior to 1981 Asset recovery “ADR”(depreciation benefits ) was tied as close to the actual term of use as a chart could be with short, medium, and long terms with many, many categories. Because of the poor economy in 1981, the Reagan administration introduced as stimulus called the “Accelerated Cost Recovery System” (ACRS) to shorten recovery periods to save tax payers money so they could invest it in new equipment. In addition they raised the Investment Tax Credit (ITC) to 10%. In 1986 Reagan obtained an overhaul of the income tax code, which eliminated many deductions such as credit card interest, business meal expenses, and exempted millions of people with low incomes. At the end of his administration, the Nation was enjoying its longest recorded period of peacetime prosperity without recession or depression.
The ACRS and ITC greatly accomplished improving the economy, however, by 1986 a huge deficit was created so Congress decided to modify the recover periods by doubling most of them. So since 1986 we have the MACRS form of depreciation. In Addition they created the alternative minimum corporate tax which lowered depreciation even more, and they decided to eliminate the ITC as Congress believed it was being abused in various tax shelters for wealthy individuals rather than business which it was aimed to provide a stimulus to acquire new equipment.
Today, if you want to offer a true lease, you will be the tax owner of the equipment. Therefore you must look at The IRS Table of Class lives and Recovery Periods to determine what your depreciation benefits will be. The form is confusing at first, so let’s review the headings to see their purpose.
I suggest opening “(2) IRS Depreciation Schedule (personal property).” In the attachment, go to the list of equipment after the charts. The first column is the asset class reported in a numerical fashion. 00.11 is the first class and the heading of the second column the description of the equipment and we find next to 00.11 office, furniture, and fixtures. You must read the definition completely to make sure you have this kind of equipment. In some cases the descriptions leave a lot to be desired. For instance looking for medical equipment you need to go to 57.0 Distributive Trades and Services where in the description you find “professional services”. Not really a clear presentation for medical equipment.
The first page from 00.11 to 00.4 are assets that are depreciated regardless of what use they are put. The second page and through the balance of the guide describe assets used in different industries and therefore the asset is depreciated based on that industry. A forklift is a good example. It can be used in many industries so you must look up the industry to determine its asset class life. You must also record the class life and report it to your tax preparers so they use the same classification.
The three columns on the right hand side of the page will tell you the term of depreciation. The most common is the center one market MACRS. However if the use of the equipment is for a non-profit then the first column class life in years is used on a straight basis. The third column called ADS is for the depreciation, if the alternative minimum tax is necessary and the depreciation benefits are reduced.
Determining the correct class life can be a problem so sometimes I suggest you call the lessee’s tax preparer or his accountant to determine which class life they have used in the past.
Once you have the correct Asset Class life and know the allowed term of depreciation, you can go to the depreciation rate for recovery period and see the percentage of the “fair value” of the equipment that is depreciated each year. The reason I say “fair value” is you cannot depreciate anything over the fair value and on occasion a vendor will increase the price to cover a loss on a trade in without telling you.
The term of depreciation has nothing to do with the term of your lease. Only the allowed percentage can be used as a deduction of your taxable income (lessee’s rent payments due and received in the current tax year. Your term of lease may be shorter or longer than the MACRS depreciation.
When a lease terminates early the undepreciated tax balance must be reconciled with the amount required to offset the accounting balance and usually there is a tax effect that must be considered to determine a correct investment return for the Lessor--- and if the tax is added to the sale price (early termination amount), you have just increased the tax because of the increased price to cover the tax, so you have increased the tax and so on and so on. You need a computer to figure the correct early termination sale price (stipulated loss value) to maintain the lessor’s yield.
To properly price a true lease you must have a computer based pricing program like Ivory Consulting’s “SuperTRUMP” so you can not only determine the correct rent payment but it will compute a stipulated loss value for each month of the lease. Some people believe that because the tax depreciation is part of the lessor’s return that the payments will always be cheaper. The truth is that short term leases usually have higher payments because the rent is so high and the depreciation is over a longer term. We say in these cases the Lessor takes on the “burden” of the depreciation, allowing the lessee to expense the rents over the term of the lease which is better for the lessee than MACRS depreciation.
Learning how to handle true lease pricing and payoffs requires the understanding of how capital recovery works and the use of the government forms. If you need help make sure you obtain it before jumping in to true leasing. By the way you cannot avoid recording the lease payments as income and trying to say that it was a financing. The tax rules work both ways and once a true lease is consummated, you are the tax owner of the equipment!
1) Accounting Web on Business Tax Credit
(2) IRS Depreciation Schedule (personal property)
Last Week’s Column:
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at email@example.com or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
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Career Crossroad—Should I update my resume?
Question: I am not looking for a new position – YET – but I think I need to update my resume – any suggestions?
Answer: First, for readers of my column, I will offer a discount to our resume service.
Reviewing / Updating / Revising your resume at the beginning of every year is a great idea! Making sure it is at your finger tips should an opportunity arise. Don’t forget timing is everything when applying for a position!
There are some individuals that have old resumes or “unmarketable” resumes. Putting a resume together in the “right way” is tedious and time consuming … get your Functional Resume done ONCE professionally and then update every year as needed OR update when your role / duties / position / employer changes.
Additionally, you should have different versions to submit to potential employers (or even you are applying for another position with your CURRENT employer):
1. One in Word
By creating your resume in three different forms – you will all your bases covered.
If it is short, you can use the Microsoft Word for email or print it out to hand to someone.
PDF for attaching to an email.
Presentation if you have letters of recommendations, samples of work you have done, and use in this personal format. You can also make this is a PDF format, depending on where you are going to make the presentation.
One main resume should be useable for all positions you want to apply for now and/or in the future … you should be able to EASILY “tailor” your resume if going after a particular role or company
Again, for readers of my column, I will offer a discount to our resume service.
Send me an email, mark the subject, “discount resume service,” with your telephone number and I will call you.
Previous Career Crossroad columns:
Leasing Industry Help Wanted
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NEFA to Attract Brokers & CLP's to its March Conference
Hilton San Diego Resort & Spa
In an effort to widen its membership, the National Association of Equipment Leasing is planning ...more educational sessions than prior years including a special series for brokers wanting to become lessors" at its 2012 National Equipment Finance Summit, being held March 22-24, at the Hilton San Diego Resort & Spa.
“Of special interest is a series focused on helping brokers make the transition to lessor,” said Gerry Egan, executive director of NEFA. ”We get a lot of requests for help from people in that situation and have put together a sort of blueprint for them to follow.”
"If you're a broker, the Summit has a special program for you.
“The brokering part of our business has changed and many brokers are struggling. But if the business has changed, then maybe it's time for you to change, too…
“Today's climate is ripe for smart brokers to transition into lessors in their own right… to see a special track of programs designed by and presented by experienced lessors, funding sources and service providers to put you on the right path to your own summit. You can do it and this is how. You'll learn why and what you need to know. There's no reason to try to figure it out on your own."
In addition, "…the whole program of educational sessions at the upcoming National Equipment Finance Summit qualifies for CLP Continuing Professional Education Credits, (CPE)."
“We’re very pleased to have the continued support of the CLP Foundation and always strive to plan programs that are consistent with the Foundation’s goals and values.” Egan said. “At the Summit, we’ll also be providing space and time for a CLP Master Review Class, and for a CLP Exam.”
Lynne Wicker, of RTR Services Incorporated, NEFA’s Summit Conference chairperson, said, “We’ve had a lot in interest in this conference and have had people waiting to register even before registration opened a few days ago. We’re also pleased that we were able to negotiate a hotel room rate at a beautiful resort property significantly less than at last year’s conference.”
Top Stories Janury 4-January 6
Here are the top ten sorties opened by readers:
(1) One of Most Influential Women in Leasing Says Goodbye
(2) Puget Sound Leasing/First Sound Bank--It's a Go!
(3) Tiger Woods Ex-Wife bulldozes $12 Million Florida Mansion
(4) PacWest Bancorp Acquires Marquette Equipment Finance
(5) Leasing 102 by Mr. Terry Winders, CLP
(6) Leasing News Person of the Year 2011
(8) New Hires---Promotions
(9) Forged Corporate Resolution Stings Creditor
(10) Q4 Equipment Leasing/Finance Employment Drops
### Press Release ############################
Fleet Financing Resources Closes $875K Alternative Fuel School Bus
Riverside, CA – Fleet Financing Resources (FFR), a boutique-style lender servicing the commercial vehicle industry, reports it has funded $875K of Lease financing for Atlantic Express of L.A., Inc., the fourth largest private school bus operator in North America. The financing was for five 2012 CNG-fueled Bluebird A3RE school buses.
This transaction was partially supported by a $225K clean transportation grant from Mobile Source Air Pollution Reduction Review Committee (MSRC). With a fleet of over 6,000 buses and coaches, Atlantic Express is dedicated to creating an environmentally friendly transportation through alternative fuel vehicles.
“This deal is another demonstration of Fleet Financing Resources ability to provide creative financing for unique equipment to an industry leader such as Atlantic Express”” said Dave Reynolds, President and Chief Executive Officer of FFR.
“As the future move towards reducing our carbon footprint, we will be alongside our customers to offer innovative financing solutions as they upgrade their fleet.”
#### Press Release ############################
Stratham, New Hampshire -- Adopt-a-Dog
Beagle Mix, Neutered Male, 2 years old, has been good with the other dogs
The New Hampshire Society
Adopt-a-Pet by Leasing Co. State/City
Adopt a Pet
PNC to lay off 600 in NC after RBC merger
UK Schools Laptop lease 'scam could cost millions
Bank files to foreclose on portion of Village of Ponderosa in West Des Moines
Pearlman's victims may get payoff from banks that lent him millions
Florida Ponzi schemer implicates many others in $1.2B fraud
Changing the State of Evening TV News
Wells Fargo leapfrogs HSBC as largest Western bank
SparkPeople--Live Healthier and Longer
12 Super foods to add to your Diet
Slideshow: Tebow's OT pass gives Broncos win over Steelers
49ers will have their hands full with Brees & Co.
On 4th-and-1, Giants Defense Showed Its Mettle
Patriots officially announce McDaniels hire
(1913-1970) US football coach
If winning isn't everything, why do they keep score?
The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather in a lack of will.
Fatigue makes cowards of us all.
We didn't lose the game; we just ran out of time.
Winning isn't everything it's the only thing.
Oakland police arrest six Occupy protesters in Saturday night march
“Gimme that Wine”
Mystery of the $75 Château de Beaucastel
Canadian Vintners hail drive to cut down strict border rules on wine sales
Eastern Ice Wine a 2012 Vintage
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Free Mobile Wine Program
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This Day in History
1776 - Propagandist Thomas Paine anonymously published "Common Sense," a scathing attack on King George III's reign over the colonies and a call for complete independence. In a land with a population of 2.5 million, 500,000 copies of Paine's stirring call for independence were sold within a few months, greatly affecting public sentiment and the deliberations of the Continental Congress leading up to the Declaration of Independence. He advocated an immediate declaration of independence from Britain. An instant bestseller in both the colonies and in Britain, Paine baldly stated that King George III was a tyrant and that Americans should shed any sentimental attachment to the monarchy
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