Financing Capital Equipment: What you Need to Know When Deciding Whether to Lease or Borrow
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Gain a better understanding of the pros and cons when determining which form of equipment financing to choose for your transactional purposes.
This topic is intended to provide the various considerations by parties to capital equipment financings, especially as to the differences between financings structured as leases or as secured financings. The discussion will include commercial law, bankruptcy, federal income tax and other tax, and accounting/balance sheet considerations. The topic will also include the typical documentation and closing process when acquiring equipment by lease or secured financing. Examples of equipment financings that might require a more specialized appreciation for the related issues will also be provided. This information will provide you with a better understanding of the general and nuanced considerations when determining which form of equipment financing best serves your transactional purposes, and how and why these transactions are typically structured, documented and closed.
AuthorsDenise L. Blau, VEDDER PRICE
Edward K. Gross, VEDDER PRICE
Daniel McKew, Daniel McKew
Ownership Matters; and We'll Explain Why
• Generally -
- The Various Risks and Benefits of Ownership; and Impact on Pricing and Structure
- What Is a Lease, and Why Does It Matter?
• Commercial Law Implications - Priority of Interests; Allocation of Risks and Responsibilities; Enforcement Rights and Remedies, and Bankruptcy
• Tax Implications - Federal Income Tax Considerations, Including Depreciation Benefits, Reporting and Disputes; and Local and Cross-Border Tax Considerations
• Accounting Implications - on or off Balance Sheet Considerations; Structural Issues; and How Strategies May Change With the New Accounting Rules
Lease Documents Aren't the Same as Loan Documents; and We'll Discuss the Similarities and (Essential) Differences
• Generally - Documenting and Closing a Lease or Secured Equipment Financing
• Lease vs. Loan Documents; What's Similar and What's Different (and Why)?
- Similarities - "Hell or High Water"; Credit Considerations; Equipment Requirements; Restrictions and Protections; Insurance; and Syndication
- Differences - Equipment Purchase; During Term and End-Of-Term Options; Return Requirements; Remedies; Income Tax Benefit-Related Provisions; and Indemnifications and Other Ownership Risk-Related Provisions
Equipment Financings Can Be Complicated; and We'll Discuss Some of Those Complicating Factors
• Bundled Financings - Can You Really Lease All of That High-Tech Stuff
• Transportation and Other Regulated Equipment - Ownership Can Be Tricky for Lessors
• Cross-Border Financings - If We Stipulate as to What Law Should Apply, Is That Enough?