Which Lease Is Right For Your Business?

Which Lease is Right for Your Business?


Financing and Accounting Terminology


F.A.S.B. 13                   This term stands for Financial Accounting Standards Board Statement No. 13, which created a specific set of guidelines for accounting for all leases.  The FASB is associated with the American Institute of Certified Public Accountants.

CAPITAL LEASE           FASB #13 requires lease be capitalized and depreciated for accounting purposes

OPERATING LEASE     Qualifies under FASB #13 for off-balance-sheet treatment.  In many cases, we can structure an operating lease if it is beneficial for the lessee.


Tax Terminology

TRAC                           (Terminal Rental Adjustment Clauses) Tax lease with lessee guaranteeing residual. Not available for consumer leases. TRAC leases are acceptable only for autos, trucks, and trailers.

TRUE LEASE                (Tax Lease) Lease whereby lessor retains tax benefits of ownership. Conditions of a true lease are broadly defined in Revenue Ruling 55-540.


Industry Terminology

CLOSED-END LEASE    (aka Net Lease, Operating Lease, Walk-away Lease) Lessor provides equipment and assumes depreciation risks.

OPEN-END LEASE       (aka Finance Lease) Lessor provides vehicle, lessee assumes risk of depreciation. In the case of a consumer lease, the Truth In Lending Act limits the risk.

MODIFIED OPEN-END    Quasi open-end lease - lessee’s depreciation risk is limited.

Analysis of the recent Federal Open Market Committ

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Two Dissents As FOMC Decides to Raise Interest Rates Again

The December FOMC decision to raise the Fed funds target rate another quarter percentage point, while widely expected by economists and the markets, reveals a chink developing in the armor of a unified FOMC.  Charles Evans and Neel Kashkari decided to vote against a rate hike this month as inflation so far has failed to lift toward the FOMC’s target.  Moreover, the revised median dot-plot was nearly identical to the one released in September, with most FOMC participants anticipating another three quarter point rate hikes next year.  Some analysts were expecting the FOMC median to signal a more aggressive rate hike path next year. 

The FOMC released a revised Summary of Economic Projections (SEP) showing a somewhat faster pace of real GDP growth through 2020 than that forecast in September.  The FOMC median now expects 2.5% GDP growth Q4/Q4 next year, up from 2.1% forecast previously.   The FOMC boosted their forecast for GDP growth by 0.1 percentage points for 2019 and 0.2 percentage points for 2020 as well.  More FOMC members are factoring in a short-term boost to GDP growth from the change in Federal tax policy. 

The labor market is expected to be somewhat tighter as a result with the unemployment rate averaging 3.9% in 2018 and 2019 - about two tenths of a percentage point lower than what was forecast in September.  

Notably, the FOMC’s median forecast for core PCE inflation was unchanged from September.   As a result, the FOMC median dot-plot of the Fed funds rate target for the end of 2018 and 2019 were unchanged from the September projections, while the long-run Fed funds rate estimate remained at 2.8%.

Yellen mentioned in her press conference that there was no need to alter the Fed balance sheet normalization program, so bond investors can expect the Fed’s balance sheet to shrink at a faster pace starting in January to $20 billion a month.  

The December FOMC statement itself was a snooze, little changed since the November meeting, though I would note that the statement around future labor market conditions was adjusted from “strengthen somewhat further” to “remain strong”.  Perhaps suggesting that labor market conditions will not materially improve from where they are today.

Bottom-line, the two new dissents on the rate hike decision today from FOMC doves revealed a growing gap on the FOMC over the implications of recent low levels of core inflation.  The FOMC median and Yellen herself stuck to their temporary factors argument, but there are definitely some FOMC members that are getting more uncomfortable with the lack of progress on bringing inflation back to the Fed’s intermediate target.  My Fed funds rate forecast is unchanged following today’s FOMC meeting.  We still look for two additional quarter point rate hikes in 2018, which remains somewhat below the current FOMC median forecast.

Treasury bonds yield dropped further following the decision.  The 2-Yr yield dropped 4.3 basis points from yesterday and the 10-Yr yield fell 5.0 basis points to 2.355%.  The dollar spot index is falling as well, down 0.64%, from yesterday’s level.  U.S. stocks held on to moderate gains today as a gradual pace of future rate hikes should keep corporate profits buoyant near-term.

Leasing - That's Good to Know!





Who are we?


F.F. Fisher Leasing Corporation is a regional provider of equipment leasing solutions to small businesses in North Dakota, South Dakota, Minnesota, Wisconsin, Montana, Iowa, Nebraska and other states where our Fargo-based relationships have expanded.  The Fisher Leasing organization is an experienced group of relationship-focused leasing experts delivering exemplary customer service.


Key Facts


·        Founded in 1989

·        Serving over 5,500 clients

·        Experienced in over 50 business segments

·        Average lease term is 42 months and average transaction size is $60,000

·        Transactions can range from $10,000 to over $1 million

·        Over 60% of originations are repeat clients           

·        Average staff experience is over 25 years


Company Focus


·        Small-ticket commercial vehicle and equipment leases and loans

·        Fleet management services

·        Agricultural and transportation equipment specialists

·        Face-to-face sales relationship model

·        Primary sales footprint is a 500-mile radius of Fargo, North Dakota

·        Strong business vehicle acquisition, lease structuring and disposition services

·        Convenient and responsive, with timely turnaround



Why Businesses Lease?


·        Over 80% of businesses lease in the U.S.  Good financial management requires companies to look at financing alternatives to creatively expand borrowing capacity and diversify liquidity sources.

·        Leasing helps companies realize the economic benefits and achieve financial flexibility not available through conventional debt financing.  Off-balance-sheet financing can leverage capital for the business.

·        100% financing that includes up-fits, training, installation and freight is available, helping the company maintain cash for operating. Lower payments and longer terms improve liquidity.

·        Fixed payments structured to the company’s cash flow helps planning and budgeting.  Payments can be expensed in the operating budget.


School & University Leasing Programs


Colleges and Universities are looking at leasing their assets as a valuable tool.  Budgetary constraints can prevent asset acquisition when they are needed.  Beginning new programs and leasing the critical equipment can provide affordable and tailored payments, versus large capital expenditures.  The ability to spread payments out over a 3, 4 or 5-year term helps keep equipment and fleet current.  To help you compare our leasing programs with traditional loans and cash purchases, please note the following:


Issue                     Leasing                               Traditional Loan               Cash Purchase

Rate                      Lease payments are           Banks tend to lend on a floating     No impact other than the

Structure              fixed for the term of          or variable basis.  This places rate  opportunity cost to reinvest funds

                              lease.                                   on you.                                               in your business.


Soft Costs             Leases can incorporate      Typically soft costs are not              More out of your cash flow.

                              100% of the transaction   financed.  You must use your

                              soft costs (shipping,          cash flow to cover these costs.

                              taxes, training, etc.)


Down                    Our lease is typically          You may be asked to pay a                             Not applicable.

Payment               structured with 1st             down payment of up to 25%.

                              payment up front.


Compensating     Not required.                      May require minimum deposit       Not applicable.

Balances                                                                           balances and numerous

                                                                           restrictive loan covenants.


Restrictive            Not required.                      May include demand clauses,         Not applicable.

Covenants                                                         blanket liens on all of your

                                                                           business assets, maintenance

                                                                           of certain financial ratios, and

                                                                           restrictions on future debt.


Revolving             A lease is fixed for              Loan may be classified as a              Not applicable.

Structure              the term of the                   revolving loan and can be

               lease.                                   cancelled on an annual basis.


Security                Only the equipment          May take a blanket lien on                             Not required.  But purchased

Filing                     leased by us is listed.         all of your business assets.                             assets become secured assets

                                                                           A blanket lien may restrict                             in favor of the bank, if a blanket

                                                                           your company from borrowing       security agreement is in effect.

                                                                           in the future.


Application          Simple process that           Process can be lengthy and             Not applicable.

Process                 is much quicker than         intimidating.  Loans can take

                              a loan.                                  up to a month to fund.


Tax                        Depending on the lease     Loans make you the owner of         Limited to depreciation over the

Implications         structure, the transaction the equipment.  This limits the       equipment’s useful life.

                              may be 100% deductible. tax advantages to depreciation

                                                                           and the interest expense.


Our Process


1.      Obtain Our Lease Proposal:  After you determine your specific equipment needs with your vendors, we can provide a lease proposal with terms and payments tailored to your specific situation.

2.      Submit Application:  If you decide to proceed, return a completed lease application, along with any requested financial information.  For your University, that can include the following:

a.      Copy of an Incumbency Certificate and Resolution authorizing the lease.

b.      Copies of your audited financial statements (last two years).

c.      Copy of your licensing approval from any regulatory oversight authority for your CDL program.

3.      Credit Review:  Our credit decision is usually rendered with 48 hours of the information and application receipt.

4.      Documentation:  Once approved, lease documents are prepared and emailed to you.  The documents must be executed by an authorized signor and returned to us.

5.      Vehicle Ordering: Once properly executed documents are received, we issue a Purchase Order to your vendor.  You then coordinate delivery details with your vendor.

6.      Delivery and Acceptance:  Upon our receipt of your vendors invoice(s), we contact you for verification of delivery and acceptance.  Once confirmed, the vendor(s) are paid and your lease begins.


Things to Consider When Comparing Proposals


Number of Advance Payments.  The number of advance payments required (such as first and last) can affect your interest rate.  We only require one upfront payment.

Are the Payments Being Applied to the Term?  True advance payments are applied as payments.  Some companies hold the payment as a “Security Deposit”.  This will increase your overall cost to lease.

Make Sure Your Payment Is Fixed and not adjusted at the last minute, based on an “index.”

Understand Your Purchase Option.  If you are told you will own the equipment at lease end, get it in writing and do not rely on what was stated verbally.

Automatic Renewal Clauses.  Make sure this clause does not appear in your lease documents.  If you miss a deadline at lease end, the lease will automatically renew for another year.


Pre-Owned Vehicles - A Good Value!

Did you know when you purchase a new car, it depreciates 20% the moment you drive it off the lot?!  It depreciates another estimated 10% the first year!  This makes buying a good-quality, late-model car a fantastic financial decision.  Along with the saving you the heartache of depreciation, buying used also keeps your insurance rates, tax, and registration fees lower.  You can also buy a substantially better quality used car that will last longer than a new one that costs the same amount.

At FF Fisher Sales, our specialty is late-model, high-quality pre-owned vehicles!


Check us out at :  www.fffisher.com

October 2017

F.F. Fisher Leasing Corporation


October 2017

Regardless of economic and market conditions, financing the acquisition of equipment rather than using cash can offer significant benefits to your business:

·       Capital preservation: Financing and the type of financing selected can help reduce the uncertainty of the investment.

·       100% financing with no down payment:  Preserve your cash flow and retain your cash reserves.  Use your money for revenue-generating areas such as worksite improvements, marketing or research and development.  Keep your business lines of credit intact.

·       Leading-edge technology:  Leasing puts state-of-the-art equipment and technology needed to grow and compete.

·       Improved expense planning:  Leasing provides certainty for budgeting by setting up customized, recurring payments to match your cash flow.

·       Reduce risk:  Leasing spreads out payments over time and helps your business stay focused on managing core operations.

Recent Transactions

Hopper Bottom Ag Trailer                 $95,000           Cattle Rancher

Mobile Lift Systems                            $40,000           Truck Repair Shop

Kenworth Heavy Truck                       $154,000         Trucking Company

Office Furniture/Systems                   $110,000         Healthcare Provider

Hoop Barn System                             $500,000         Cattle Rancher

Work Trucks                                       $400,000         Engineering Services Company

Farm Truck with Grain Box                $36,000           Grain Farmer 

C-Store Equipment                            $55,000           C-Store/Repair Shop Operator

New SUV                                             $72,000           Executive Vehicle

Communication Equipment              $181,000         Municipality

Heavy Haul Trailer                             $100,000         Construction Company

Brewing Tanks/Equipment                $30,000           Craft Brewer


Check Us Out: www.fffisher.com

Advantages of Leasing Equipment

If you are wondering if leasing is a good option for your business, check out this link!  

Are your lines of credit stretched and you need more equipment?  Check out this link!


Medical Equipment Leasing

Medical equipment leasing is a perfect solution for acquiring the needed equipment to set up your medical/dental practice.  Medical equipment can be extremely expensive to purchase and often times is out-of-date well before the final payment is made.  FF Fisher can provide leasing and lease lines of credit for your business, providing leasing on everything it takes to get your business up and running.  We lease office equipment, phone systems, computer hardware and software and, of course, medical equipment. We can even lease the walls for your office space!

Dr. Michael Lillestol – Lillestol Research and Internal Medicine Associates (ima Healthcare)

"We have leased computers - software and hardware; office furniture and equipment, as well as vehicles from F.F. Fisher leasing.  We have worked with them for many years, and they have always provided us with outstanding customer service and support for all of our leasing needs."

Leasing - Everyone is Doing It

According to the SBA, over 80% of businesses lease a portion of their equipment.  Along with providing significant tax advantages, leasing vehicles and equipment can help your business maintain cash reserves, increase cash flow, and preserve bank lines of credit.  Leasing also helps businesses grow without significant out-of-pocket expenses.

Two of the most popular reasons businesses choose leasing:

1.    You can write off 100% of your lease payments from your business corporate income; the IRS does not consider operating leases or TRAC leases to be a purchase.  This write off can surpass the tax advantages of bonus depreciation and accelerated depreciation.

2.  Speed - bank loans seem to take forever and require considerable information.  Our business vehicle and equipment leasing uses a simple underwriting process, and most approvals come back in 24 hours, with approval rates of over 90%.

How Can Small Businesses Save on Taxes?

Here’s a way for small business to save on taxes: Buy a heavy SUV or pickup

Published: May 18, 2016 6:19 a.m. ET


A big truck could mean a big write off



Joe Raedle/Getty Images

Here’s a write-off that many small business owners neglect: a van or truck.

“Heavy” SUVs, pickups, and vans used over 50% for business are eligible for the first-year Section 179 depreciation write-off in the year they are first put to business use. In addition, new heavy vehicles are eligible for first-year bonus depreciation.

In many cases, these favorable depreciation rules allow you to write off the entire business-use portion of a heavy vehicle’s cost in year one. And you may get some nice state tax income deductions too. Here’s what you need to know to cash in.

The Benefits of Keeping a Food Diary

Heavy vehicle tax break basics

The super-generous first-year depreciation deduction rules I’m about to explain only apply to vehicles used over 50% for business.

The business-portion of the cost of a vehicle is first reduced by the allowable Section 179 deduction. For heavy vehicles that are classified as SUVs under the tax rules, the Section 179 deduction is limited to $25,000. Other heavy vehicles, such as long-bed pickups and vans, are unaffected by the $25,000 limit.

Importantly, pickups with cargo beds that are at least six feet in interior length are not classified as SUVs (pickups with shorter beds are treated as SUVs).

Next comes the allowable first-year bonus depreciation deduction, but this break is only available for new vehicles.

Finally, the business portion of the remaining cost (if any) is depreciated under the “regular” depreciation rules, usually at a 20% rate in Year One.

Example 1

Before the end of the year, you buy a new $45,000 heavy SUV and use it 100% in your sole proprietorship business. Your first-year depreciation deduction is $37,000: $25,000 Section 179 deduction + $10,000 first-year bonus depreciation deduction [50% x ($45,000 - $25,000)] + $2,000 “regular” depreciation deduction [20% x ($45,000 - $25,000 - $10,000)].

The $37,000 in write-offs will reduce your federal income tax bill and your self-employment tax bill too. You may get a healthy state income tax deduction too, although some states have refused to go along with the super-generous depreciation rules enacted by the federal government.

In contrast, if you buy a new $45,000 sedan and use it 100% for business, your first-year depreciation write-off will be only $11,160. For a new $45,000 light truck or light van, your first-year write-off would be only $11,560.

Example 2

Same basic story but you buy a heavy pickup with a long bed for $45,000. For federal income tax purposes, you can deduct the entire cost on this year’s return under the Section 179 deduction privilege. The pickup can be either new or used.

Nice! In contrast, if you buy a used $45,000 sedan, your first-year depreciation write-off will be only $3,160. For a used $45,000 light truck or light van, your first-year write-off would be only $3,560.

Picking out a suitably heavy machine

The Section 179 deduction and bonus deprecation deals are only available for an SUV, pickup, or van with a manufacturer’s gross vehicle weight rating (GVWR) above 6,000 pounds that is purchased (not leased).

It’s easy to find attractive vehicles with GVWRs above the magic 6,000 pound threshold. Examples include the Audi A7, BMW X5 and X6, Buick Enclave, CadillacGM, +1.66%  scalade, Chevy Tahoe, Dodge Durango, Jeep FCAU, +0.37%  Grand Cherokee, Nissan 7201, -3.09%  Titan, Toyota TM, +1.59%  Tundra, Ram pickups, and most other full-size pickups. You can usually find the GVWR on a label on the inside edge of the driver’s side door.

More good news: The IRS has confirmed that heavy SUVs qualify for the aforementioned depreciation tax breaks whether they are built on a truck chassis or an auto chassis. So heavy crossovers qualify if they are used over 50% for business. Source: IRS Chief Counsel Advice (CCA) 201138048.

Now for the caveats

Needless to say, the favorable depreciation rules for heavy vehicles come with limits. Here are the ones that are most likely to apply.

First, your Section 179 deduction cannot exceed your aggregate net business taxable income (calculated before the Section 179 write-off). However, if you operate as a sole proprietorship, or as a single-member LLC treated as a sole proprietorship for tax purposes, you can count any wages that you earn as an employee as additional business income. If you are married and file jointly, you can also count your spouse’s earnings from employment as well as any self-employment income that he or she may earn. These loopholes reduce the odds that you’ll be hurt by the net business income limitation.

If you operate as a partnership, multi-member LLC, or corporation, special rules apply. So consult your tax adviser about how to take full advantage of the depreciation breaks for heavy business vehicles in your situation.

In the five tax years following the year that you put your heavy vehicle into service, the business-use percentage must continue to exceed 50%. Otherwise, you run afoul of “recapture” rules that will force you to add back some of your previous depreciation write-offs into your taxable income. So to fully cash in on the aforementioned depreciation breaks, you must be committed to using the vehicle mainly for business for at least six years.

The bottom line

As things now stand, the heavy vehicle depreciation breaks I’ve outlined here are “permanent” features of our beloved Internal Revenue Code. But nothing is really permanent when it comes to taxes. Depending on how this year’s elections turn out, much less favorable rules could apply in future years. So you might want to get your heavy vehicle purchase done before year-end.