The Lease Closer Newsletter
July/August 2002
Inside This Issue
η The Lease World
η The Closers
Corner
η Why Lease
The Articles in this
newsletter do not necessarily represent the views of Granieri Associates but
the views of the writers themselves. If you would like to comment on a
particular article please call Granieri Associates during normal business hours
(9:00-6:00 PM)
Spotlight
η The Lease World
η Customer
Frustrations
η Objections
Connection
Table of Contents
Why Lease
2
Lease World
4
Internet Data
.6
Top Gun Seminar
Schedule
..7
Objection
Connection
8
The Closers
Corner
.9
July/Aug 2002 The
Lease Closer Page 2
Why Lease?
You have all heard that one before, havent you? The fact is that there
are more reasons for business entities to lease than are ordinarily published
in the brochures of leasing companies.
Controlling The Decision
Making Level
When equipment acquisition costs exceed capital budgets, division
managers often must go to a higher authority for the money. Not only is this
time consuming , but sales have a way of getting killed in the process.
I have found that since leasing payments can come from an operating
budget, lower level decision makers can often make the financing decision
themselves.
Increasing Reported Income
Coaches and mangers in professional sports live and die by their win-lose
records. Similarly, corporate mangers are evaluated by the numbers they
produce. And these numbers are interpreted into a corporate win-lose column by
various financial ratios.
The important ratios are return on assets (ROA) and Return on Equity
(ROE). True (not necessarily operating) lease may have the effect of increasing
reported earnings because the payments do not lower pre-tax income as much as
depreciation and interest expenses. And, Obviously, if you increase net income
after taxes, you increase ROA and ROE.
July/Aug 2002 The
Lease Closer Page 3
FASB 13 Operating Lease
Most leasing companies today, especially brokers, write some form of
capital lease as their bread and
butter. Fine. Still there is a lot of extra income to be made structuring
leases that satisfy FASB 13 requirements. Please note that you can structure
true lease for tax purposes that do not meet FASB 13 requirements for operating
leases. The potential loss of income occurs when you have a buttercup
transaction - credit, rates, etc., - but the lessees accountant wants an
operating lease that qualifies under FASB 13. In these instances, you are faced
with two different alternatives:
1. Structure
2. Walk
Personally, I think you should structure because theses transactions can
add a great deal to your annual income.
Token Payments During Down Seasons
Everyone is familiar with skipped payment programs that meet a prospects
cash flow needs. A variation of the skip concept that is becoming popular is to
have the lessee make token payments during the periods that would ordinarily be
skipped,e.g.10% of the regular monthly payment.
Example
COE: $45,000 Term: 36
months Yield: 17% Option:
$1
Adv: 0 Profit: 5pts
July/Aug 2002 The
Lease Closer Page 4
NPV of the Known Quantities
105+/- in
in 36in
17/12 - I%
NPV: -105 +/- Sto 9
NPV of the unknown Quantities
The lessee wants token payments of 10% in Jan, Feb, and Mar of each year.
The Lease begins in Dec
0 in
1 in in
.10 in 3in
1 in 9in
.10 in 3in
1 in 9in
.10 in 3in
1 in 9in
Exit Calc
17/12 = I%
NPV: 21.42635
Sto/9 RCL9 4.90051
.0490051 x $45,000 = $2205.23 or $2205.50 Regular Pmt
$2200.53 or $221.00 during the down season ($220.52 is 10% of the regular
payment)
Lease World
In 2001 the leasing industry grew to $114.6 billion in new
business volume versus $112.7 billion in the previous year.
According to the FDIC, banking industry ROA edged up 1 basis point in
2001 to 1.19%
July/Aug 2002 The
Lease Closer Page 5
ELA 2002 Survey Results
and Highlights
Most new business volume was found in the large ticket market segment,
the more than $5 million transaction size category (35%). The $250,00 to $5
million segment represents 26% of the business volume, the $25,000 to $250,000
category shoes 12% of the volume; and transactions less than $25,000, 27%.
The most widely used remarketing method to dispose of equipment at the
end of the initial lease term was equipment purchased by the original lessee at
54%. (46% was abandoned or returned)
71% of applications submitted were approved, 54% booked and funded or
brokered.
Overall 42% of survey respondents reported being engaged in e-commerce in some form.
Independent lessors represent approximately 36% of industry new business
volume. Bank lessors represent 38% , and captive leasing companies represent
26%
Survey: US Hiring Cautious
24% of the companies surveyed
expected to hire more people in the fourth quarter, while 9% plan to cut
workers, according to Manpower Incs quarterly survey of 16,000 businesses.
The finance, insurance and real estate sector is the only one surveyed
that anticipates improved hiring compared to last quarter a year ago, the
survey found.
July/Aug 2002 The
Lease Closer Page 6
The manufacturing sector, hit hard by the recession, expects to maintain
a consistent hiring level , which is a significant improvement over a year ago.
The Midwest is leading the nation in the recovery of manufacturing jobs,
while the south expects to experience higher demand for workers in the services
sector.
: Internet Data :
Granieri Associates
Website: www.granieriassociates.com
a wealth of selling information for the firing line leasing salesperson.
Michael Granieri e-mail: . Granite63@aol.com
Ph 732-828-8891 Fax 732-828-8887
The Financial Services
Monitor: www.monitordaily.com
The Wall Street Journal of the equipment leasing industry
The Equipment Finance
Journal: www.efj.com
An excellent supplement to the monitor.
Other Websites worth a visit
www.eael.org
www.naelb.org
www.uael.org
www.elaonline.org
www.leasingnews.org
www.leasingissues.com
www.triad-group.com
www.wildwoodfinancialgroup.com
www.lindakester.com
www.corporatelearn.com
July/Aug 2002 The
Lease Closer Page 7
Granieri Associates: Top Gun Seminar Schedule
East
( Mon, Sept 23, 2002 - Boston, MA
( Frid, Oct 18, 2002 - Wash, DC
South
( Mon, Oct 7, 2002 - Charlotte, NC
( Mon, Nov 11, 2002 - Atlanta, GA
( Tues, Nov 12, 2002 - Birmingham,
AL
( Mon, Dec 2, 2002 - Ft. Lauderdale,
FL
Midwest
( Mon, Oct 21, 2002 - Chicago, IL
West
( Mon, Nov 4, 2002 - Phoenix, AZ
( Mon, Nov 18, 2002 - San
Francisco, CA
( Mon, Dec 9, 2002 - Anaheim, CA
Ά Topic: Lease Marketing Strategies
· Time: 9:00 - 4:30 PM
Έ Cost: $200.00 per person
or $175.00 per person for two or more.
July/Aug 2002 The Lease Closer Page 8
The Objection Connection
Bank Financing
Capital Lease vs Bank Loan
1. Purchase option offers
flexibility.
2. Down payment may be lower with a
lease
3. Establish a new line of credit
4. Terms and conditions are usually
more flexible with a lease.
5. Restrictive covenants
Lease vs Loan
1. Faster write offs in many cases
2. Tax impact
3. Option provides more flexibility
4. More flexible terms and conditions
5. Possible off-balance sheet
financing
Rates vs Bank or Cash
1. Tax impact with True leases
2. Custom Financing: Compare to
lessees product or service - general benefits
3. Give benefits pertinent to
individual lessee i.e., specific benefits
For example: Deferred payment program.
Competitive Rates
1. Six substantive reasons why youre
worth your rates.
2. Get involved in the sale. Dont
become a benign quote giver.
3. Know thy competitors total
proposal in order to make sure your lessee is comparing apples to apples.
4. Mr. Prospect: Is getting the
lowest monthly payment the most important part of a financing proposal?
July/Aug 2002 The
Lease Closer Page 9
Customer Frustrations
39% felt that
salespeople were difficult to communicate with
Precisely they listed difficulty in getting through to salespeople for
post-sale follow up. They felt that there were too many layers of voice mail
and red tape between them and their sales representatives.
Stress Point: Many salespeople are guilty of the
sell em and forget em syndrome. After they get the customers check they
move on to the next prospect and relegate service to the back burner. A
dissatisfied customer tells an average of eleven people about his
experience with in twenty-four hours. Also,
it costs much more to obtain a new client than it does to maintain an existing
one.
29% said that
salespeople do not take time to learn about their company
A few years ago a study revealed that people tend to buy from salespeople
whom they perceive as being sincerely interested, trusted advisers, who could
help solve their problems. All of theses traits point toward the type of
salesperson who takes time to learn about their prospects and clients
companies