Stedman Financing Programs
STATED OPTION LEASES
The main feature of a stated option lease is that it allows a
producer to finance equipment without a large up-front payment. While there is a large payment at the end of a stated option lease, the customer's monthly payments are reasonable. This enables the customer to retain cash flow while using the equipment. At the end of the stated option lease, the customer can purchase the equipment for a guaranteed amount — thus
eliminating the risk of making an unknown "fair market value" purchase. A company should consult a CPA or tax consultant to determine whether a option lease is in its best interest.
FAIR MARKET VALUE LEASES
Also called an Off Balance Sheet Lease, this financing option is linked to the covenant the
producer has with the bank, financial institution, or bonding company for an On Balance Sheet debt. It's similar to the stated option lease in that there will be a lump sum due on the equipment at the end of the lease. The amount due is based on the fair market value of the equipment at the end of the lease period, as appraised by the
financial institution.
ACCELERATED PAYMENT PROGRAMS
An accelerated payment program is the quickest way for a
producer to build equity. Such a program increases the value of a trade allowance in the event of an early trade-in and is ideal for
producers who don't have a huge net worth. Of all the financing options discussed here, this is the one with the lowest gross repayment. The customer will actually be paying less in interest costs. Since the
producer is paying the bulk of the equipment cost in the early years, the accelerated payment program is also one of the most attractive to lenders.
SKIP PAYMENT PROGRAMS
This option is particularly appropriate for producers doing business in the northern part of the country, where weather shuts down production for all or part of the winter. The skip payment program is designed to match the customer's sales period. It is often the ideal choice for companies that have equity and are able to make higher payments during the nine months of the year that they are producing.
CONDITIONAL SALE CONTRACTS
As the most common financing option, the conditional sale contract requires an initial down payment and level payments spread out over several years. Often referred to as a straight purchase, this is the easiest and most uncomplicated repayment structure of all. With a conditional sale contract, a
producer usually establishes equity up front by making a significant down payment with no money due at the end of the contract.
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