Success Stories

Vendor-Signed Commercial Lease

We were brought into a large transaction where a County government in Florida had a need to upgrade their outdated telecom infrastructure but did not have the time or ability to issue a bond to cover the $2,000,000 investment . In addition to not being able to buy the system they did not have the ability to take on any more debt by signing a conventional municipal lease either. Undaunted by these obstacles we worked with the vendor and the County to come up with a solution to truly helped facilitate this transaction.

We structured a commercial lease that was signed by the vendor and not by the County. The vendor was reimbursed by the County who redirected the funds to cover the monthly payment from a different area of their operating budget. That was the easy part.

The difficult piece of this transaction was the incorporation of the “funding out” clause into the commercial lease. Government leases all have a “convenience” or a “funding out” clause that enables the government to cancel any equipment lease if the funds for the payments are not allocated in subsequent years budgets because government budgets are only approved on a year to year basis. For example a government entity can enter a five year lease and cancel the lease in year two and return the equipment without further obligation for the remaining three years of the lease if the expense budget is not allocated for this obligation in year three of the lease.

This “funding out” clause is not part of a normal lease. The vendor although they were a relatively large company in their own right did not want to get into this lease and be saddled with this debt for five years if the government exercised their “funding out” clause prior to the fifth year of the lease.

There was definitely a need by the client to get this new system. Most people would have walked away from this transaction frustrated by the fact that they almost had a transaction. By working closely with the vendor and the County government this enabled us to get a good appreciation of the situation and after thoroughly evaluating the business case and merits of this transaction we decided to structure an financing vehicle that included the “funding out” clause that our vendor needed prior to them signing a lease for the County government. This custom document signed by the vendor enabled all three entities to get the assurances that they needed and the $2,000,000 transaction concluded successfully.

Operating or Tax Lease

We were presented with an opportunity to finance a $770,000 Avaya Definity G3R phone system. We were competing against the manufacturer’s captive leasing program as well as several other financing institutions including of course the clients own bank. The lessee is relatively young and growing, with rapid growth presenting several difficult credit hurdles to overcome. We also faced significant pricing challenges with this client as well. We were required by the customer to structure this transaction as an operating or tax lease. This type of lease meets the FASB accounting guidelines in order for the lease to be off-balance sheet, which was very important to the client because this type of lease greatly improved their financial ratios and they were soon going public.

By working aggressively with the client, our asset management group, and our credit underwriters we were able to present a financing package that addressed both the needs of the client and our credit underwriters. When the smoke cleared, Atlantic Capital was selected as the most attractive funding source for this transaction. Upon soliciting feedback from the CFO we were told that we were selected based on four basic factors: we listened to the client, we delivered aggressive pricing, we provided the necessary FASB operating lease structure and we moved quickly.

These $770,000 transactions do not sell themselves. It is crucial to have a funding partner who not only knows finance but also knows how to help their vendor partner sell their equipment. We typically initiate a dialogue with the CFO while our vendor does the same with the CIO. If your sales team is only addressing the technical aspects of the transaction they are going about this with one hand tied behind their back. With larger clients it is critical to have the CFO’s buy in as well.

Typically we see that CIO’s are asked to run the technical infrastructure of the company as efficiently as possible which ideally would mean that they purchased new equipment on a monthly basis. The CFO’s on the other hand are the direct opposite. They are compensated to run the company as cost effectively as possible meaning that they can get a bonus if they can make that phone system or computer network last for ten years. By working on our vendors behalf we can help get the CFO’s buy in and greatly enhance our vendors probability of getting the sale. This added value service that Atlantic Capital provides often helps cost justify our vendors offering and helps differentiate them from their competition who often does not or can not address the clients financial objectives from the CFO’s perspective.

Split Funding Transaction

A lessee of ours was awarded a multi-million dollar award from the Federal Government to maintain a significant complex of theirs in the Washington Metropolitan area. In order to service this large contract the lessee required over $400,000 worth of equipment that needed to be on-site by a certain date or the contractor would be fined by the government for each day the equipment was late.

The financial position of this entity did not easily support a $400,000 stand alone transaction. Cash or bank financing was not an option. The client and the equipment vendor were becoming increasing concerned. We ended up splitting this transaction and taking it in smaller pieces to an additional four funding sources. Atlantic Capital remained the single point of contact for the lessee and the vendor during the course of this transaction.

Working hand in hand with the client, vendor, and the additional funding sources enabled us to successful conclude this transaction in a timely manner. The vendor received their purchase orders and their funding in time. The lessee received their equipment in time. This effort turned out to be a success for all parties involved in this transaction.

Atlantic Capital - Columbia, MD