The Air Resourced Board (ARB) has expanded its financial assistance to offer TRAC leases to small businesses that lease-to-own their diesel trucking equipment. Under ARB guidelines, small businesses are those with fewer than 101 employees, $10 million or less in annual revenue, and 40 or fewer on-road heavy-duty vehicles.
TRAC leases are terminal rental adjustment clause leases, and are widely used in the trucking industry. TRAC leases allow businesses to take advantage of tax benefits associated with leases, while retaining the option to purchase the equipment at the end of the lease for a predetermined price.
The way the ARB/State Treasurer partnership works is that an eligible small business may apply for a TRAC lease at a participating lender. As an added measure of security for the lender, the TRAC lease is insured by the State Treasurer’s California Capital Access Program. The program is intended to encourage financial institutions to make loans to small businesses that don’t quite meet standard underwriting guidelines.
Eligible small businesses may use the program to obtain new or used equipment, as long as the equipment complies with ARB’s statewide in-use truck and bus regulations and heavy-duty greenhouse gas regulation.
ARB implemented the TRAC lease program to encourage small businesses to comply early with the ARB Truck and Bus Regulation, which requires upgrades to reduce emissions from diesel trucks and buses that operate in California. Older trucks must be replaced starting January 1, 2015. By January 1, 2023, nearly all trucks and buses will need to have 2010 model year engines or equivalent.
If you are a lender in a TRAC lease transaction, be certain you are fully informed of any options available under California law to insure your recovery in the event of default. The attorneys at Glass & Goldberg provide high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law. Call us at (818) 888-2220, email us at email@example.com, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.