Case Study: Retail Printing – Master Lease

Need: New Printing Press

EXECUTIVE SUMMARY

This company needed a new printing press to fullfill new contracts which demanded 3x the current output. This new equipment had to fit within the same foot print as the previous printing press at the existing factory (facility expansion was not an option). To have this custom piece of machinery built and installed in the USA was an 18 month process. First choice: Master Lease.

ABOUT THE COMPANY

HQ Location: Tennessee

In Business For: less than 2 years; spin off Company from the parent Corporation

Annual Revenues: $132M

Customer Base: Domestic, Retailers Nationwide

CHALLENGES

> The low interest, government loan our client was offered would only cover half ($3M) of the $6.5M needed for the new, custom-built printing press. This government loan would only be available after  the equipment was installed and up-and-running. This left two gaps: 1.) an 18 month time gap on receiving the funds and, 2.) a shortfall of $3.5M.

> $6.5M was needed upfront to order the machine. This lender needed to understand that in 18 months half of the loan would be paid off, reducing the amount of interest they would receive over the life of the lease.

SOLUTION

Leap Kapital was able to secure a Master Lease Option as a solution. This allowed several advantages:

> The equipment was off the balance sheet (which makes for a better financial leverage structure) and on a “lease” which means they had the full tax benefits of 100% deductions verses a purchace which would reduce the deductable amounts.

> This Master Lease brought $7.5M to cover not only the custom build of the printing press but also covered the “soft costs” of installation and employee training.

> This Master Lease is similar to a Revolving Line of Credit in that you have the flexibility to pay only the interest when needed.

> As the Master Lease is paid down, additional equipment can be purchased and added to the lease without the need for a re-application process.

> The Lease is expandable as the Company grows.

One way Leap Kapital fills the financial gaps in business is with Master Lease A Master Lease affords maximum tax benefits without adding a liability on the balance sheet and it grows with the Company.

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