At one time or another, just about every active business will face the challenge of replacing an old piece of equipment or a software program or acquiring new widget machine to help keep their business competitive or to accommodate growth.  These are good challenges to have.  The challenge that’s not so good is figuring out how you’re going to pay for it.  What you really need it to know what your options are and that’s where Charter Capital can help.

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When faced with paying for a new piece of equipment most small business owners simply defer to what they believe is the cheapest solution and that’s their bank.  That may be the cheapest solution and it may even be the best solution but there are about a gazillion reasons why it might not.  A few years ago, we wrote an article titled “Stuff Most Bankers Won’t Tell You” and despite the passage of time and lots of new banking and lending regulations, all of the reasons outlined in that article remain true today.  If you would like to learn what they are just, click here.  read more

A few thoughts and cautions on the Financial Accounting Standards Board’s New Guideline On Lease Accounting.

The FASB (Financial Accounting Standards Board) makes changes all the time about how you have to prepare your business financial statements in order to comply with generally accepted accounting standards. Most of them are technical and don’t really affect your day-to-day business. We think this New Guideline for Leases is a different kind of animal and we’re pretty sure it will prove to be very punitive for many of the unprepared.

Before this new guideline came out, businesses had a certain latitude on how they accounted for just about any equipment financing that was documented as a Lease. Now there is no choice and unless a lease has very specific structure characteristics (which most do not), the new guideline requires that you account for it as a loan and not a lease. This is true not only for any new financing but in most cases, you will have to change how you report your existing equipment obligations as well.   read more

Last month, The Tax Cuts and Jobs Act was signed into law.

Our friend Kit Menkin explains how the bill affects Section 179 and what this means for your business.

With the passage and signing into law of H.R.1, aka, The Tax Cuts and Jobs Act, the deduction limit for Section 179 increases from $500,000 to $1,000,000 for 2018 and beyond. The limit on equipment purchases likewise has increased, from $2 million to $2.5 million. In addition, the deduction now includes any of the following improvements to existing nonresidential property (i.e., the improvement must be placed in service after the date the property itself was first placed in service): roofs; heating, air-conditioning, and ventilation systems; fire protection, alarm, and security systems. read more

Many years ago, I signed up to play golf in a charity tournament. It was a good cause and I loved to play so I sent in my donation and blocked out the day on my calendar. The day of the tournament I showed up and found I was playing in a group of men, most of whom I didn’t know. They seemed like a typical group of small business owners and managers and I was more than ready to enjoy the day.

I don’t remember the exact format but it was a two-man team game I was paired with a big guy, maybe 6’4” and I was hoping for a few monstrous drives. We played a few holes, telling a few jokes, cheering for each other good naturedly and creating an overall feeling of camaraderie. He liked my putting and I loved his drives. read more

Today there are fees for just about everything we do and in the business environment many are justified and many are simply a way for a company to make extra revenue. Banks and other commercial lenders are notorious for their fees, many of which are not disclosed to a borrower until they are signing loan documents.

We believe you should know what fees are being charged and what they are for. We’ve compiled the fee list below so the next time you apply for a commercial lease or loan you’ll be a little smarter. read more

Have you ever received a letter from a commercial leasing or finance company congratulating you because your company has been Pre-Approved for some amount, usually $75,000 or $100,000 or $150,000?

I have and so have most companies that have more than ten employees, annual revenues in excess of $3 million, generally good pay habits and a good Dun & Bradstreet rating. If you have received such a letter the good news is that you made the “A” list but the bad news is that PRE-APPROVED doesn’t really mean anything. The truth is that you still have to fill out an application for credit and still have to qualify for the amount you are seeking to borrow or lease. If you stop to think about it PRE-APPROVED literally means BEFORE APPROVAL although most commercial lenders won’t tell you that. read more

The following is a true story.

Several years ago a potential customer approached us to do an equipment lease for slightly under $50,000 of equipment. The business was pretty well-established and provided video editing for movie and TV production companies in Southern California. The only problem was that the owner had recently divorced and (1) no longer owned a home and (2) had some slow payments as a result of the somewhat messy end to his marriage.

We evaluated the credit and submitted a formal request to one of our lenders and ended up approving and funding the lease at a pretty competitive rate especially given his recent personal credit hiccups. read more

Interim rent was originally conceived to compensate commercial lenders for the time their funds were invested beyond the traditional 30 days for the next first scheduled monthly payment of a lease. This concept is also employed in consumer real estate loans when ‘extra interest’ is charged for the days between an existing loan being paid off and the new loan becoming due. At its core this concept makes sense. Let’s assume a lender funds a loan or a lease on the first of the month and the next payment is scheduled on the 15th of the following month. Most lenders’ original calculations assume that payments will be made every 30 days and in the scenario above the first payment was actually due in 45 days. There are 15 days that the lender does not have the use of their funds and for which time they are not being compensated. So the logical solution is to pay the lender ‘interest’ at the same rate as the loan or lease is structured at for the extra 15 days. Seems fair but that’s not what’s being done by most commercial lenders. read more

The evergreen clause is a masterpiece of deception used by some leasing companies, brokers and commercial lenders. According to BusinessDictionary.com an evergreen contract is an “agreement between two parties that is automatically renewed (rolled over) after each completion or maturity period, until canceled by either party”. The way this is applied in equipment leasing situations is to provide the customer with a fixed price option to purchase the asset being leased once the initial term of the contract has expired and the customer has made all payments. This is usually negotiated before the customer has committed to the lease and is generally part of the customer’s economic evaluation and ultimate decision. The customer is even given a separate document that evidences they have the right to purchase the asset for a specific price, usually $1.00. read more