Scenario 2

A manufacturer purchased an ERP computer system with a fair market value lease. The company established a covenant with the bank to carry the equipment off the balance sheet in order to secure financing and conserve its existing line of credit. This financing option allowed the manufacturer to get the equipment on-site and working while still maintaining a line of credit in case of emergency or unexpected expenses during the term of the lease. Of course, the manufacturer had to pay the appraised value of the computer system at lease end.