Cembrus Capital offers the following financial products and tailors a solution to fit your company’s unique characteristics and specific borrowing requirements:
Fixed Rate Term Loans
Primarily structured as a Note and Security Agreement, with a fixed interest rate fixed and locked 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.
Variable Rate Term Financing
This financial instrument is structured as a Note and Security Agreement, with a variable interest rate component. The rate index can be tied to multitude of financial rates. The payments are adjusted on a periodic basis if the rate moves. 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.
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.
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.
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.
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.
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.
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.
Implementation Finance – Progress Payments
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.
Sale and Leaseback
A sale and leaseback transaction may provide a company 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.