Equipment Financing

Equipment or Fixed Asset Related Products

Cembrus Capital offers the following financial products and tailors a solution to fit your company's unique characteristics and specific borrowing requirements:

•  Small Business Administration
•  CDC/504 Loan Program
•  7(a) Loan Program
•  Fixed Rate Term Financing
•  Variable Rate Term Financing
•  Operating Leases
•  Tax Leases
•  Capital Leases
•  Balloon Payment Structures
•  Deferred Payment Options
•  Seasonal Payment Structures
•  Step Payment Structures
•  Implementation Finance
•  Sale and Leaseback

Small Business Administration

Small Business Administration or SBA is a government agency that helps Americans start and manage small businesses. The SBA was founded by congress in 1953 and provides small businesses with loans, disaster assistance, and training.

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CDC/504 Loan Program

The CDC/504 Loan Program is a long-term financing tool. The program is designed to promote economic development within a community. This is accomplished by providing small businesses with long-term, fixed-rate financing to acquire major fixed assets.

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7(a) Loan Program

The 7(a) Loan Program offers assistance for businesses with special requirements. Funds are available for loans to businesses that deal with exports to foreign countries and business in rural areas.

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Fixed Rate Term Financing

This financial instrument is structured as a Note and Security Agreement, with a fixed rate typically indexed to comparable term treasury notes at the inception of the transaction. The primary benefit to this structure is that it is generally less restrictive than a traditional bank loan. The only security, typically, on the note is the asset listed on the security agreement schedule.

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Variable Rate Term Financing

This financial instrument is structured as a Note and Security Agreement, with a variable rate component. The rate index is typically tied to 90-day LIBOR or Commercial Paper rates with payments that are adjusted on a periodic basis. Because this financial product is tied to short-term indices, it often provides customers with a lower upfront rate and payment. The only security, typically, on the term note is the underlying asset scheduled on the security agreement.

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Operating Leases

This structure qualifies as an Operating Lease under Generally Accepted Accounting Principles (GAAP) SFAS13 guidelines. Accounting benefits include keeping the liability and asset off-balance sheet. This provides enhanced financial reporting by improving a company's financial ratios. In some cases, this structure allows a company to remain within its bank covenants. The Operating Lease serves as a "hedge against obsolescence" and is frequently used for high technology asset acquisitions.

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Tax Leases

This structure qualifies as an operating lease under Internal Revenue Code parameters. Qualifying as a tax lease is generally less objective than for a GAAP operating lease -- and focuses mainly on whichever party retains the "benefits and burdens" of ownership. A qualifying Tax Lease allows the lessor to depreciate the asset and the lessee to treat the payments as an expense for federal tax purposes. Benefits to this structure include potential reduction in Alternative Minimum Tax (AMT) liability and possible lower rates due to the lessor taking the depreciation benefit.

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Capital Leases

This is a lease that fails to qualify as an Operating Lease under GAAP guidelines; therefore the asset and attendant liability are recorded on the lessee's balance sheet. The asset is depreciated as though it were acquired with cash or financed via a loan. This structure is typically secured only by the asset on the lease schedule and can be structured with a variety of payment structures and end of term purchase options.

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Balloon Payment Structures

This option provides a balloon or put payment at the end of a term note or lease. This provides the client with a buy-out option that, in effect, provides a longer amortization period under the financing instrument and therefore lower payments over the term of the financing.

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Deferred Payment Options

This option provides a 60, 90 or 120 payment deferral period typically at transaction inception. This provides the client with the ability to ramp up the use or productivity of the underlying asset being financed and match that productivity with a deferred payable.

Seasonal Payment Structures

This option provides a payment structure that matches the client's business seasonality to the lease cash outflow. A very beneficial structure for seasonal industries such as construction and retail oriented businesses.

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Step Payment Structures

This structure provides either a step up or down in the payment amount after a specified period of time, typically after the first year. Step up payment structures are very useful in situations where an asset's productive use is ramping up over a period of time. This allows the cash inflow associated with the use of the asset to more closely match the cash outflow on the financing. A step down is useful when the client or lender requires the associated lease debt be paid down more quickly when compared to a lease with an equal tenor yet level payments.

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Implementation Finance

This product is useful for software implementations, plant build-outs and progress payments for any equipment. This allows the bundling of soft costs, such as services, customization, and training, along with the asset hard costs under a single payment structure. Upon final acceptance of the project or completion of the implementation the costs are rolled, or "termed" into another financial product.

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Sale and Leaseback

A sale and leaseback transaction provides your firm with increased cash flow and all the benefits associated with the chosen lease structure. It is often utilized to generate value out of previously purchased assets. Companies that have purchased large amounts of technology over a previous six-month period or that own higher value collateral (such as manufacturing equipment) purchased years earlier can qualify for a sale and leaseback transaction.

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