Points Against Bank:

  1. Often require compensating account balances (increase real rate).
  2. Often have restrictive covenants (hampers management strategy).
  3. Require large down payment (reduces leverage of client) that comes out of current assets.
  4. An annual clean up period may be required.(i.e. once a year banks require customer to pay down all loans.)
  5. Rates are generally floating and can jump up and down throughout the term.
  6. Often requires blanket liens on all assets, which hampers management leverage.
  7. Banks may call the note at any time.
  8. Decreases available credit, going back to an operating loan a bank may deny request based on total exposure.
  9. Can only expense interest and depreciation, therefore total out of pocket expenses are greater as depreciation schedules are generally 7-10 years.


Points for Providence Capital Lease:

  1. 12 to 36 month lease terms which can create better cash flow.
  2. No compensating balances.
  3. No documentation and restrictive covenants creating greater flexibility.
  4. 100% financing
  5. No points
  6. Fixed rates.
  7. Secure only equipment to be financed, no blanket liens.
  8. Lease terms locked in, can not ever call lease payable and no clean up period.
  9. Competitive price, especially once factors such as tax reductions, compensating balances, down payment, loan fees and annual clean up are considered.
  10. Increase credit availability - an additional credit line saves bank lines for operating purposes.
  11. Expense total payment with tax lease.  Generally 100% of a lease payment can be expensed.  This enables quicker recovery of investment especially for longer life leases.
  12. Soft costs are covered.  These soft costs can include training, shipping, installation and computer software.  This helps current cash flow and maintains ratios.