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There are numerous opportunities to invest in equipment leasing programs.A key distinction between these programs versus something like a BDC is equipment leasing programs tend to be self-liquidating investments, while BDCs tend to rely on stock appreciation, and a listing or liquidity event down the road. Banking, in contrast, began during the Roman Empire about 700 B. Ancient Phoenicians leased ships using very specific residual assumptions, thus making equipment leasing the world’s oldest form of finance.

OPPORTUNITIES AND RISKS Several facets of the current economy portend good things to come for equipment lessors/lenders.Let’s now understand how “equipment leasing” differs from “equipment financing.” Equipment leasing programs typically used operating lease structures with fair market value residual risks, while equipment financing programs are more akin to a debt financing, with the added benefit of having a PMSI in the equipment collateralizing the financing.Most equipment leasing programs were indeed successful in terms of the four advantages listed above.First, any repeal to the Dodd-Frank Wall Street Reform and Consumer Protection Act could bring new competition as banks reenter the market, which could have a downward impact on interest rates.

The second factor, however, revolves around the perception that interest rates have remained artificially low and, with the end of quantitative easing, increasing interest rates are anticipated.

A PRIMER ON EQUIPMENT LEASING From a GAAP perspective, there are two types of leases: operating leases and capital leases.