Funding Flashcards
Assets
Things that a business owns or controls that support or directly contribute to revenue generating activities (machines, real estate, inventory)
Fixed Assets
Assets that are intended for use rather than sales (machines, vehicles)
Funding Assets
Cash - Capital available on hand
Debt - Borrowed capital that must be repaid with interest such as Line of Credit, Auto Loan, Auto Lease
Reduced Book Value
Remaining balance (principle) at the end of the lease
Closed Ended Lease
(Net Lease) Depreciation and interest paid monthly during term and has no responsibility for residual balance at end of term. Typically limited on total mileage and fees for early termination, over-mileage, and wear and tear. Best suited for clients with predictable mileage and low wear and tear (vehicles driven by managers or sales reps)
Open Ended Lease
(Equity Lease) Lessee finances the entire cost of the vehicle and responsible for residual at the end of term (either buy out or sell and pay/keep difference). No restrictions for mileage or wear and tear
EFM Funding Solutions
Flexbility - Options for different types of financing, opened or closed leases or depreciated to zero
Additional line of credit
Open Ended Lease Formula
Depreciation + Lease Charge = Monthly Lease Payment
Depreciation using straight line method
(Cost - Residual) / Term = Depreciation
Lease Charge
Interest Charge plus Management Fee
Interest rate calculation
T-Bill plus 300 basis points (3%)
Average Outstanding Balance (AOB)
The unpaid balance of the financed amount (capitalized amount) averaged over a period of time
AOB Calculation
((Total Cap Amount + Residual) / 2) + Service Charge + 1/2 Monthly Depreciation
Interest Charge Calculation
(Base Interest Rate +/- Interest Adjustment) x AOB / 12
Management Fee
The remaining portion of the lease charge on an equity lease after the interest charge which is a percentage of the vehicle factory invoice cost and the EFM adjustment
