For the nine months ended September 30, 2017 and 2016, the Partnership incurred the following underwriting fee transactions:

At September 30, 2017March 31, 2018 and December 31, 2016,2017, net investment in finance leases consisted of the following:

Aircraft

In connection with the consolidation of SQN Helo, the Partnership holds two helicopter finance leases with two different third parties. As of December 31, 2016, these finance leases has a net book value of $3,378,129. One finance lease requires 18 monthly payments of $79,167 which commenced in August 2016. Upon expiration of an operating lease in August 2017, the lease was restructured as a direct finance lease and the Partnership reclassified it to investment in finance leases. This finance lease requires 24 monthly payments of $79,167 which commenced in August 2017. The other finance lease requires 48 monthly payments of $32,500 commencing in April 2017. At September 30, 2017,March 31, 2018, there were no significant changes to these leases.

Aircraft Parts Equipment

In December 2016, the lease agreement for aircraft rotable parts equipment for approximately $775,000 was amended and extended for an additional 18 months. The amended finance leases require 18 monthly payments in aggregate of $90,116 commencing on December 16, 2016. At September 30, 2017,March 31, 2018, there were no significant changes to this lease.

Computer Networking Equipment

On February 29, 2016, the Partnership entered into a finance lease transaction for computer networking equipment for $1,541,461. The finance lease requires 36 monthly payments of $48,171 commencing on March 1, 2016. On March 30, 2017, the Partnership sold this finance lease to a third party for cash proceeds of $999,321. The finance lease had a net book value of $984,693 resulting in a gain of $14,628.

On May 25, 2016, the Partnership entered into a second finance lease transaction for computer networking equipment for $656,772. The finance lease requires 36 monthly payments of $20,524 commencing on June 1, 2016. On March 30, 2017, the Partnership sold this finance lease to a third party for cash proceeds of $488,029. The finance lease had a net book value of $483,152 resulting in a gain of $4,877.

Furniture and Fixtures and Server Equipment

On January 31, 2016, the Master Equipment Lease for servers, fixtures and furniture for approximately $2,700,000 commenced (as described in Note 6) and the Partnership reclassified the equipment note to investment in finance lease. The finance lease requires 36 monthly payments of $77,727 which commenced on February 1, 2016. On June 24, 2016, Juliet entered into a second finance lease transaction for servers, fixtures and furniture for $337,131. The finance lease requires 31 monthly payments of $12,464 commenced on July 1, 2016. At September 30, 2017,March 31, 2018, there were no significant changes to these leases.

Furniture, Fixtures and Equipment, as well as Computer Hardware & Software

On December 30, 2015, the Partnership entered into a finance lease transaction for furniture, fixtures and equipment, as well as computer hardware and software for $1,500,000. The finance lease requires 30 monthly payments of $58,950. At SeptemberMarch 31, 2018, there were no significant changes to this lease.

Anaerobic Digestion Plant

On January 31, 2016, construction of the anaerobic digestion plant was completed and the lease commenced (as described in Note 6) and the Partnership reclassified the equipment note to investment in finance lease. The lease requires 20 quarterly payments of £41,616 ($59,823 applying exchange rate of 1.4375 at May 16, 2016) began on April 30, 2017,2016. At March 31, 2018, there were no significant changes to this lease.

Manufacturing Equipment

On October 7, 2015, the Partnership entered into a finance lease transaction for manufacturing equipment for $58,000 (“SCHWRD 1”). The equipment is subject to a 60 month lease with a Connecticut-based engraving, decal and die manufacturing company. The finance lease requires 60 monthly payments of $1,277. On December 29, 2015, the Partnership entered into a second finance lease transaction for manufacturing equipment for $94,300 (“SCHWRD 2”). The finance lease requires 60 monthly payments of $2,077. On December 30, 2015, the Partnership assigned the SCHWRD 1 finance lease to Juliet. On February 13, 2017, the Partnership, through Juliet, received cash proceeds of $52,145 as payment in full of the SCHWRD 1 finance lease. On April 28, 2017, the Partnership sold the SCHWRD 2 finance lease to a third party for cash proceeds of $76,474. The finance lease had a net book value of $73,638 resulting in a gain of $2,836.

Computer Networking Equipment

On September 1, 2015, the Partnership entered into a finance lease transaction for computer networking equipment for $446,677 (“Comp Net 1”). The Comp Net 1 finance lease requires 36 monthly payments of $14,195. On October 30, 2015, the Partnership entered into a second finance lease transaction for computer networking equipment for $297,689 (“Comp Net 2”). The Comp Net 2 finance lease requires 36 monthly payments of $9,460. On December 29, 2015, the Partnership entered into a third finance lease transaction for computer networking equipment for $389,266 (“Comp Net 3”). The Comp Net 3 finance lease requires 36 monthly payments of $12,456. On December 30, 2015, the Partnership assigned the Comp Net 1 and Comp Net 2 finance leases to Juliet. On March 30, 2017, the Partnership sold the Comp Net 3 finance lease to a third party for cash proceeds of $250,696. The finance lease had a net book value of $248,240 resulting in a U.S. GAAP gain of $2,456. On March 15, 2018, the Partnership purchased the Comp Net 3 finance lease for $93,230 (cash of $173,009 less $79,779 debt forgiveness). The Comp Net 3 finance lease has 8 remaining monthly payments of $12,456.

Gamma Knife Suite - TRCL

On April 30, 2015, the Partnership acquired from a third party, 20 quarterly lease payments with respect to a gamma knife suite leased to a hospital in the United Kingdom. The Partnership paid £375,000 ($576,750 applying exchange rate of 1.538 at April 30, 2015) for the equipment lease receivables which are payable under the lease from July 2015 through April 2020. The finance lease requires 20 quarterly payments of £25,060. The equipment lease receivables are secured by the gamma knife suite. At September 30, 2017,March 31, 2018, there were no significant changes to this lease.

Medical Equipment

On March 31, 2014, the Partnership entered into a finance lease transaction for medical equipment for $247,920. The finance lease requires 48 monthly payments of $7,415. On December 30, 2015, the Partnership assigned this finance lease to Juliet. At September 30, 2017, there were no significant changes to this lease.The finance lease terminated on March 31, 2018.

In connection with the consolidation of SQN Helo, the Partnership holds four helicopter operating leases with two different third parties. As of December 31, 2016, these operating leases had an aggregate net book value of $9,871,737. One operating lease requires monthly payments of $80,160 and expired in August 2017. Upon expiration of operating lease, this lease was restructured as a direct finance lease and the Partnership reclassified it to investment in finance leases. The other three operating leases require 48 monthly payments of $32,500, $32,500 and $19,000, respectively, commencing in April 2017.

On October 24, 2016, the die board cutting equipment lease commenced. The operating lease requires 60 monthly payments of $6,329 beginning on October 24, 2016. On April 28, 2017, the Partnership sold the die board cutting equipment operating lease to a third party for cash proceeds of $344,957. The operating lease had a net book value of $338,629 resulting in a gain of $6,328.

September 30, 2017:March 31, 2018:

December 31, 2016:2017:

Depreciation expense for the three and nine months ended September 30, 2017March 31, 2018 was $794,772 and $2,109,431, respectively.$322,878.

Manufacturing / Solar Equipment

On June 29, 2016, SQN Gamma LLC, assigned its commitment interest in a loan facility, under a Credit Agreement dated November 17, 2015, to the Partnership and to Juliet in the amount of $3,893,165 and $2,500,000, respectively. On June 30, 2016, the Partnership and Juliet funded $3,893,165 and $2,500,000, respectively under this loan facility. The loan facility accrues interest at a rate of 11% per annum and matures on March 31, 2021. The borrower is required to make 51 monthly payments of principal and interest beginning on January 31, 2017 and an additional final payment due at maturity date of 8% of the aggregate principal amount of loans made. On August 17, 2016, the Partnership funded $730,170 to the same borrower. The loan facility accrues interest at a rate of 10.5% per annum and matures on August 1, 2019. The borrower is required to make 36 monthly payments of principal and interest beginning on September 1, 2016 and an additional final payment due at maturity date of 5% of the aggregate principal amount of loans made. The loan facilities are secured by solar products manufacturing equipment. On January 18, 2017, the Partnership entered into an assignment agreement to sell the solar products manufacturing equipment note dated June 29, 2016 for cash proceeds of $4,021,250 ($3,893,165 principal and $128,085 accrued interest). On March 29, 2017, the Partnership entered into an assignment agreement to repurchase the solar products manufacturing equipment note dated June 29, 2016 for cash proceeds of $4,107,294 ($3,893,165 principal and $214,129 purchase interest). On April 17, 2017, the borrower voluntarily filed for Chapter 11 bankruptcy protection. The Partnership received monthly payments in accordance with terms from this borrower through February 28, 2017. As of September 30, 2017,March 31, 2018, the March 2017 through September 2017March 2018 monthly payments are outstanding, therefore this loan facility is in non-accrual status as a result of the bankruptcy and of non-payment. For the three As of March 31, 2018 and nine months ended September 30,December 31, 2017, the equipment notes earned interest incomePartnership placed a reserve on this asset of $0$752,611 and $41,648,$1,022,742, respectively.

Construction Equipment

On April 14, 2016, the Partnership, through Juliet, acquired an interest in loan notes from a third party leasing company for $1,529,674. The loan notes are secured by a portable wash plant and a fleet of cement mixers and dump trucks which are owned by a Texas-based construction company. Under the terms of the loan agreement, the borrower is required to make 72 monthly payments of principal and interest of $28,865. The loan is scheduled to mature on March 31, 2022.

On June 3, 2016 and on June 24, 2016, the Partnership, through Juliet, acquired additional interest in two loan notes from the third party leasing company for $205,000 and $1,289,163, respectively. Under the terms of the loan agreements, the borrower is required to make 60 and 72 monthly payments of principal and interest of $4,450 and $24,326, respectively. The loans are scheduled to mature on June 30, 2021 and June 30, 2022, respectively.

On September 30, 2016 and in December 2016, the Partnership, through Juliet, acquired an additional interest in a loan note from the third party leasing company for $1,426,732 and $1,619,283, respectively. Under the terms of the loan agreement, the borrower is required to make 72 monthly payments of principal and interest of $57,925 and the loan is scheduled to mature on September 30, 2022.

On December 2, 2016 and on December 23, 2016, the Partnership, through Juliet, acquired additional interest in two loan notes from the third party leasing company for $43,177 and $2,335,960, respectively. Under the terms of the loan agreements, the borrower is required to make 60 monthly payments of principal and interest of $950 and $48,100, respectively. These loans are scheduled to mature on November 30, 2021 and June 30, 2021, respectively. On January 9, 2017, the Partnership, through its investment in Juliet, sold the loan note for construction equipment dated December 23, 2016 to a third party for cash proceeds of $2,252,389. The loan note had a net book value of $2,239,760 resulting in a U.S. GAAP gain of $12,629.

For the three and nine months ended September 30, 2017,March 31, 2018, the equipment notes earned interest income of $144,284 and $467,130, respectively.$134,259.

Food Manufacturing Equipment

On April 11, 2016 (“Funding Date”), the Partnership extended a loan facility in the amount of $2,500,000 to a Minnesota-based manufacturer of a commercial low-sodium salt substitute. The loan is secured by food manufacturing equipment. Under the terms of the loan agreement, the borrower is required to make 36 monthly payments of principal and interest of $81,657. The loan is scheduled to mature on April 1, 2019. The borrower is required to make the first and last monthly payments on the Funding Date and then make 34 monthly payments of principal and interest of $81,657 which commenced on June 1, 2016. For the three and nine months ended September 30, 2017, the equipment note earned interest income of $0 and $67,250, respectively. On March 30, 2017, the Partnership sold this loan note to a third party for cash proceeds of $1,802,371. The loan note had a net book value of $1,790,618 resulting in a gain of $11,753.

Manufacturing and Testing Equipment

On March 8, 2016 (“Funding Date”), the Partnership loaned $1,992,000 to a California-based LED lighting manufacturer located in California. The loan is secured by manufacturing and testing equipment located at one of the manufacturer’s facilities. The promissory note requires 30 monthly payments of approximately $76,016 and has a final balloon payment of 3% of the aggregate principal amount due on September 1, 2018. The borrower is required to make the first and last monthly payments on the Funding Date and then make 28 monthly payments of principal and interest of $76,016 which commenced on May 1, 2016. For the three and nine months ended September 30, 2017, the equipment note earned interest income of $0 and $35,293, respectively. On March 30, 2017, the Partnership sold this loan note to a third party for cash proceeds of $1,232,293. The loan note had a net book value of $1,173,422 resulting in a gain of $58,871.

Transportation Equipment

On January 23, 2016 and on March 4, 2016, the Partnership acquired two loan notes from a third party leasing company for approximately $247,194 and $204,303, respectively. The loans are secured by transportation equipment. Under the terms of the loan agreements, the borrower is required to make 72 monthly payments of principal and interest of $4,697 and $4,045, respectively. The loans are scheduled to mature on January 23, 2022 and March 3, 2022, respectively. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment notes earned interest income of $10,703 and $34,411, respectively.$9,768.

Secured Business Loans

On December 31, 2015, Juliet extended two separate loan facilities to two borrowers. The borrowers are both subsidiaries of a UK based parent company that provides small and medium sized secured business loans (“Just Loans”). Each facility provides financing up to a maximum borrowing of £5,037,500 or together a total of £10,075,000 and accrues interest at a rate of 10% per annum. The funds can be drawn down in increments of up to £1,000,000 per month per facility with the exception of the first draws which were each in the amount of £1,037,500 in order to fund a certain third party fee of £37,500. The loan is repayable in monthly interest only payments due on the last day of each month. Principal is due nine months after December 31, 2016 on September 30, 2017 (“Termination Date”). The loans are secured by share pledges of the borrowers, a guaranty from the UK based parent company, and the underlying loan portfolio that Just Loans generates. In February 2016, the loan facilities were amended to include an annual fee, payable within 15 days of end of calendar year, equal to 30% of the interest paid or payable in the immediately preceding calendar year. In connection with the novation agreement, the Termination Date was extended to September 30, 2018. On December 29, 2015, Juliet advanced a total of $2,974,000 to the Just Loans borrowers. On February 18, 2016, Juliet advanced a total of $2,878,000 to the Just Loans borrowers. On April 18, 2016, the Partnership, through its investment in Juliet, advanced a total of $2,140,350 to the Just Loans borrowers. On December 13, 2016, Juliet advanced a total of $740,160 to the Just Loans borrowers. For the three and nine months ended September 30, 2017, the equipment note earned interest income of $45,799 and $378,307, respectively. On March 29, 2017, Juliet entered into a deed of novation agreement to novate 85% of this loan note to SQN Asset Finance (Ireland) Designated Activity Company (“SQN AFI”) and 15% to the Partnership for $7,947,310. Onon March 31, 2017, Juliet received cash proceeds of $6,416,092 from SQN AFI and a due fromfor the Partnership of $1,531,218.85% interest. The loan note had a net book value of $7,804,888$6,273,670 resulting in a U.S. GAAP gain of $142,422. On March 31, 2017 the Partnership and SQN AFI advanced a total of $2,497,400 to the borrowers. Onon April 28, 2017, the Partnership advanced a total of $374,610 and $370,187, respectively, to the Just Loans borrowers. For the three months ended March 31, 2018, the equipment note earned interest income of $286,542.

Honey Production Equipment

On December 14, 2015, the Partnership acquired a loan note from a third party leasing company for approximately $12,789, and is secured by honey production equipment. Under the terms of the loan agreement, the borrower is required to make 36 monthly payments of principal and interest of $425. The loan is scheduled to mature on November 30, 2018. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment note earned interest income of $189 and $600, respectively.$106.

Towing Equipment

On October 30, 2015, the Partnership acquired a loan note from a third party leasing company for approximately $96,000. The loan is secured by a heavy duty tow truck which is owned by a Connecticut-based towing and repair company. Under the terms of the loan agreement, the borrower is required to make 60 monthly payments of principal and interest of $2,041. The loan is scheduled to mature on October 31, 2020. On December 30, 2015, the Partnership assigned this equipment notes receivable to Juliet. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment note earned interest income of $1,657 and $5,925, respectively.$1,429.

Tractor and Trailer Equipment

On October 30, 2015 and on November 4, 2015, the Partnership acquired two loan notes from a third party leasing company for approximately $147,919 and $15,000, respectively. The loans are secured by tractor and trailer equipment. Under the terms of the loans agreements, the borrower is required to make 60 monthly payments of principal and interest of $3,255 and $330, respectively. The loans are scheduled to mature on October 31, 2020. On December 30, 2015, the Partnership assigned these equipment notes receivable to Juliet. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment notenotes earned interest income of $8,280 and $15,668, respectively.$3,053.

Furniture, Fixtures and Equipment

On October 30, 2015, the Partnership acquired a loan note from a third party leasing company for approximately $817,045. The loan is secured by furniture, fixtures and equipment. Under the terms of the loan agreement, the borrower is required to make 35 monthly payments of approximately $26,145, accrues interest at a rate of 18.84% per annum and has a final balloon payment of approximately $123,000 on November 1, 2018. On December 30, 2015, the Partnership assigned this equipment note receivable to Juliet. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment notenotes earned interest income of $20,390 and $67,726, respectively.$12,048.

Mineral Processing Equipment

On September 27, 2013, the Partnership entered into a loan facility to provide financing up to a maximum borrowing of $3,000,000. The borrower is a Florida based company that builds, refurbishes and services mineral refining and mining equipment in the United States, Central and South America. The loan facility was secured by equipment that refines precious metals and other minerals. The Partnership advanced $2,500,000 to the borrower during September 2013. The loan facility required 48 monthly payments of principal and interest of $68,718 (revised from original payment of $69,577 upon second funding discussed below) and a balloon payment of $500,000 in September 2017. The loan facility maturedwas scheduled to mature in September 2017. On May 9, 2014, the Partnership made a second funding of $500,000 to the borrower under the above agreement. The loan facility required 41 monthly payments of principal and interest of $15,764 and maturedmatures in September 2017. The borrower’s obligations under the loan facility were also personally guaranteed by its majority shareholders.

On December 22, 2014, the outstanding principal of $2,537,822 and accrued interest of $204,721 of this note receivable was restructured into a new note receivable of $2,883,347. The new loan facility is secured by equipment that refines precious metals and other minerals and is guaranteed by the majority shareholders of the Florida based company referred to above. The new loan facility requires 48 monthly payments of principal and interest of $79,255 commencing on February 24, 2015 and a balloon payment of $500,000 in January 2019. The loan facility is scheduled to mature in September 2017.January 2019. In connection with above restructured note, on December 22, 2014, the Partnership entered into a $200,000 promissory note with the same borrower. The promissory note requires five annual payments of $150,000 commencing on January 25, 2019 and matures in January 2023. As of December 31, 2014, the Partnership advanced $100,000. In January 2015, the Partnership advanced the remaining $100,000. In June 2015, the Partnership received a principal payment of $40,000. For the three and nine months ended September 30, 2017 and for the years ended December 31, 2017, 2016 and 2015, the mineral processing equipment note is in non-accrual status as a result of non-payment. As of December 31, 2017, the Partnership placed a reserve on this asset of $1,043,347. Based on a third party appraisal of the collateral value of the equipment, the Investment Manager believes that there is sufficient collateral value to cover the remaining outstanding balance of the restructured note receivable and the promissory note.

Medical Equipment

On December 19, 2014, the Partnership entered into a $667,629 promissory note to finance the purchase of medical equipment located in Texas. The promissory note will be paid through 60 monthly installments of principal and interest of $15,300. The promissory note is secured by a first priority security interest in the medical equipment and other personal property located at the borrowers principal place of business. On December 30, 2015, the Partnership assigned this equipment note receivable to Juliet. For the three and nine months ended September 30, 2017,March 31, 2018, the medical equipment note earned interest income of $12,457 and $41,901, respectively.$10,068.

Brake Manufacturing Equipment

On May 2, 2014, the Partnership purchased a promissory note secured by brake manufacturing equipment with an aggregate principal amount of $432,000. The promissory note requires quarterly payments of $34,786, accrues interest at 12.5% per annum and maturesmatured in January 2018. For the three and nine months ended September 30, 2017,March 31, 2018, the equipment note earned interest income of $5,887 and $20,823, respectively.$5,184.

The future maturities of the Partnership’s equipment notes receivable at September 30, 2017March 31, 2018 are as follows:

On September 15, 2014, the Partnership entered into a Residual Interest Purchase Agreement with a leasing company to purchase up to $3 million of residual value interests in equipment. The leasing company has entered into a Master Lease Agreement with a third party to lease cash handling machines or smart safes under one or more lease schedules with original equipment cost of $20 million (“OEC”) and a term of five years from initiation of each lease schedule. In connection with the Master Lease Agreement, the leasing company has entered into a finance arrangement with another third party to finance 85% of the OEC up to an aggregate facility of $17 million and the Partnership has agreed to finance the remaining 15% of the OEC up to an aggregate facility of $3 million. As of September 30, 2017,March 31, 2018, the Partnership had advanced a net total of $2,775,060.

On July 20, 2017, the Partnership, through Juliet, provided secured financing in the amount of $3,867,435 after applicable exchange rates for a motion picture production company in the United Kingdom. The loan is secured by all of the assets, including tax credits, of the borrower and all of the borrower’s rights to proceeds from the motion picture. The loan accrues interest at a rate of 12% per annum and is scheduled to mature 24 months after the funding date. For the three and nine months ended September 30, 2017,March 31, 2018, the loan facility earned interest income of $91,547.

On March 31, 2017, the Partnership entered into a Loan Participation Agreement to purchase a 61.8% interest in a 5% Surplus note receivable with principal of $2,225,000 maturing on February 25, 2018. On March 31, 2017, the Partnership funded $1,495,313 for the purchase of this participation. In connection with the Loan Participation Agreement, on that same date, the Partnership entered into a forward purchase agreement to sell this participation interest on July 7, 2017 for the purchase price of the participation plus a 12% rate of return. On June 30, 2017 and on July 21, 2017, the Partnership sold this forward purchase agreement for total cash proceeds of $1,515,985. For the three and nine months ended September 30, 2017, the loan facility earned interest income of $20,673.$114,434.

On September 23, 2016, the Partnership, through Juliet, provided secured financing in the amount of $1,845,655 after applicable exchange rates for a motion picture production company in the United Kingdom. The loan is secured by all of the assets, including tax credits, of the borrower and all of the borrower’s rights to proceeds from the motion picture. The loan accrues interest at a rate of 12% per annum and is scheduled to mature 24 months after the funding date. For the three and nine months ended September 30, 2017,March 31, 2018, the loan facility earned interest income of $50,675 and $150,372, respectively.$40,694.

On September 12, 2016, the Partnership, through Juliet, provided secured financing in the amount of $2,215,270 after applicable exchange rates for a motion picture production company in the United Kingdom. The loan is secured by all of the assets, including tax credits, of the borrower and all of the borrower’s rights to proceeds from the motion picture. The loan accrues interest at a rate of 12% per annum and is scheduled to mature 24 months after the funding date. For the three and nine months ended September 30, 2017,March 31, 2018, the loan facility earned interest income of $67,004 and $198,828, respectively.$65,548.

OnFrom July 21, 2016 September 15, 2016, and September 30, 2016,through December 31, 2017, the Partnership funded $1,817,444, $181,598 and $300,846, respectivelya total of $12,342,624 under a wholesale financing arrangement with an international leasing company that does business between the United States and Mexico. On October 7, 2016, a third party on behalf of Juliet, funded an additional $1,759,570 under this wholesale financing arrangement. On October 4, 2016, November 23, 2016, November 29, 2016 and December 30, 2016,During the three months ended March 31, 2018, the Partnership funded an additional $854,390, $291,919, $78,912 and $78,095, respectively under this wholesale financing arrangement. On January 13, 2017 and February 23, 2017, the Partnership, through Juliet, funded an additional $1,463,260 and $814,320, respectively under this wholesale financing arrangement. On March 8, 2017, the Partnership funded an additional $256,987 under this wholesale financing arrangement. On April 4, 2017 and April 5, 2017, the Partnership, through Juliet, funded an additional $1,825,656 and $314,753, respectively under this wholesale financing arrangement. On August 24, 2017 and September 29, 2017, the Partnership, through Juliet, funded an additional $500,000 and $896,722, respectivelytotal of $580,216 under this wholesale financing arrangement. The loans accrue interest at rate of 10% per annum and are secured by industrial and manufacturing equipment subject to equipment leases. During the three months ended March 31, 2018, the Partnership received total payments of principal and interest of $2,004,158 from this wholesale financing arrangement. For the three and nine months ended September 30, 2017,March 31, 2018, the loans earned interest income of $278,015 and $710,257, respectively.$313,562.

On May 5, 2016, a third party on behalf of Juliet, provided secured financing in the amount of $2,926,342 after applicable exchange rates for a motion picture production company in the United Kingdom. The loan is secured by all of the assets, including tax credits, of the borrower and all of the borrower’s rights to proceeds from the motion picture. The loan accrues interest at a rate of 12% per annum and is scheduled to mature 24 months after the funding date. For the three and nine months ended September 30, 2017,March 31, 2018, the loan facility earned interest income of $65,368 and $210,016, respectively.$57,215.

On April 25, 2016, the Partnership entered into a loan agreement with a borrower to refinance the borrower’s loan facility. In connection with the refinancing, the Partnership received a promissory note from the borrower in the amount of $1,763,230. The note accrues interest at a rate of 20% per annum and matures on February 8, 2020. The borrower will make semi-annual payments of principal and interest in February and August. On August 5, 2016, the Partnership received a payment of $452,604. In March 2017, the Partnership received total payments of $335,644. In August 2017, the Partnership received total payments of $305,550. In February 2018, the Partnership received total payments of $278,919. For the three and nine months ended September 30, 2017,March 31, 2018, the promissory notes earned interest income of $66,020 and $209,162, respectively.$56,897.

On June 3, 2015, Alpha, a special purpose entity which is 32.5% owned by the Partnership and 67.5% owned by SQN PAC, acquired a promissory note issued by a third party with a principal amount equal to $2,650,000. The promissory note accrues interest at the rate of 11.1% per annum, payable quarterly in arrears, and matures on June 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the third party which include equipment leases, direct hard asset and infrastructure investments, and other securities. On June 3, 2015, a participation agreement was entered into between SQN PAC (“Alpha Participation A”), the Partnership (“Alpha Participation B”), Alpha and SQN Capital Management, LLC. Under the agreement, Alpha created two collateralized participation interests for the collateral; Alpha Participation A’s principal contribution is $1,788,750 and accrues interest at 9% per annum and Alpha Participation B’s principal contribution is $861,250 and accrues interest at 15.05% per annum. SQN Capital Management, LLC was appointed as a servicer for the promissory note. Alpha Participation A’s interest is senior to Alpha Participation B’s interest. For the three and nine months ended September 30, 2017,March 31, 2018, the Alpha Participation B earned interest income of $32,961 and $97,809, respectively.$32,245.

On August 13, 2015, the Partnership entered into a Loan Note Instrument to provide €1,640,000 ($1,824,992 applying exchange rate of 1.1128 at August 13, 2015) (the “Facility”) of financing to a borrower to acquire shares of a special purpose entity (the “SPE”). The SPE previously acquired, by assignment, the rights to lease a parcel of land in Ireland on which planning permissions have been granted to construct an aerobic digestion plant (“AD Plant”). The Facility accrues interest at the rate of 18% per annum, compounding monthly on the last business day of each month, and matures on May 16, 2016. The maturity date was extended to November 30, 2016. The Facility is secured by the shares of the SPE and also secured by a personal guaranty from the principal owner of the borrower. On May 13, 2016, in connection with an extension of the Facility, the Partnership funded an additional $56,750 after applicable exchange rates. On July 29, 2016, the Partnership funded $1,574,724, after applicable exchange rates, under a Loan Note Instrument to provide additional financing of the Facility. The Loan Note Instrument matures on November 30, 2016. On November 4, 2016, the Partnership funded $700,000, after applicable exchange rates, under a Loan Note Instrument to provide additional financing of the Facility. As of September 30, 2017March 31, 2018 and December 31, 2016,2017, the Loan Note Principal balance was $4,148,419. On February 28, 2018, the Loan Note Instruments were cancelled and replaced with a Loan Note Instrument of €5,167,426, which accrues interest at the rate of 9% per annum, compounding monthly on the last business day of each month, and matures on September 30, 2019. For the three and nine months ended September 30, 2017,March 31, 2018, the Loan Note Instruments earned interest income of $190,827 and $566,259, respectively.$171,507.

On December 28, 2015, the Partnership entered into a loan agreement and a $2,000,000 promissory note with a borrower. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on December 28, 2020. On April 15, 2016, the loan agreement was amended and restated and the maturity date was amended to December 30, 2024. For the three and nine months ended September 30, 2017,March 31, 2018, the promissory notes earned interest income of $55,000 and $165,000, respectively.$55,000.

On October 2, 2015, the Partnership entered in a syndicated loan agreement. Under the terms of the agreement, the Partnership agreed to contribute $5,000,000 of the $40,000,000 facility which will be secured by all of the equipment of the wood pellet business in Texas. The borrower’s parent company also pledged assets located at the parent’s company’s headquarters in Germany as additional collateral for the loan. In January 2016, the Partnership received cash of $2,610,959 as payment from this facility. On April 22, 2016, the Partnership and a third party assigned their interests in this loan facility of $2,389,041 and $3,985,959, respectively to Juliet. For the three and nine months ended September 30, 2017March 31, 2018 and the years ended December 31, 20162017 and 2015,2016, this loan is in non-accrual status. Based on an appraisal of the collateral value of the equipment, the Investment Manager believes that there is sufficient collateral value to cover the outstanding balance of this loan.

On August 1, 2014, the Partnership, SQN PAC, and a third party formed a special purpose entity, Informage SQN Technologies, LLC (“Informage SQN”), a limited liability company registered in the state of Texas. Informage SQN was formed to finance cellular communications field measurement and testing and other related services to telecom clients on a contractual basis. The Partnership and SQN PAC each own 24.5% of Informage SQN, while the third party owns 51%. The Partnership accounts for its investment in Informage SQN using the equity method. The Partnership will make additional contributions up to $3,850,000 of total aggregate outstanding capital contributions. On February 9, 2015, the primary customer of Informage SQN filed for bankruptcy protection under Chapter 11 in order to reorganize the company. Informage SQN is not in default under any of the agreements with the Partnership. As of December 31, 2016, the Partnership has advanced a total of $1,357,622 and received total repayments of $690,936. For the three and nine months ended September 30,As of December 31, 2017, the Partnership recordedplaced a reserve on this investment income of $6,792 and investment loss of $5,148, respectively, for its proportionate share of Informage SQN’s earnings under the equity method pursuant to U.S. GAAP.$537,754. As of September 30, 2017,March 31, 2018, the Partnership has an investment balance of $539,040.$0.

On December 16, 2015, Marine, a special purpose vehicle which is wholly owned by the Partnership, entered into a sale and assignment of partnership interest agreement with a third party. Under the terms of the agreement, Marine acquired an 88.20% (90% of 98%) economic interest in a portfolio of container feeder vessels. Marine acquired their economic interest in the vessels through a limited partnership interest in CONT Feeder, which acquired and operates the container feeder vessels. CONT Feeder acquired ninesix container feeder vessels for $37,911,665, drydocking fees of $4,158,807 and inventory supplies of $337,923 for an aggregate investment of $42,408,395. As of September 30, 2017,March 31, 2018, the Partnership has an aggregate investment balance of $37,326,541$33,390,178 consisting of feeder vessels of $34,429,847,$31,041,014, drydocking fees of $2,583,807$2,133,807 and inventory supplies of $312,887.$215,357.

CONT Feeder acquired and operates ninesix container feeder vessels which collect shipping containers from different ports and transport them to central container terminals where they are loaded to bigger vessels. For the three months ended September 30, 2017,March 31, 2018, CONT Feeder recorded income of approximately $4,036,000$4,132,000 from charter rental fees less total expenses of $4,290,000,$4,322,000, consisting of ship operating expenses, of approximately $2,386,000,$2,552,000, ship management fees and charter commissions fees of approximately $401,000,$424,000, general and administrative expenses, of approximately $483,000,$424,000, depreciation expense, of approximately $725,000$677,000 and interest expense of approximately $295,000$245,000 resulting in a net loss of approximately $254,000. For the nine months ended September 30, 2017, CONT Feeder recorded income of approximately $11,073,000 primarily from charter rental fees, less total expenses of $13,897,000, consisting of ship operating expenses of approximately $7,089,000, ship management fees and charter commissions fees of approximately $1,321,000, general and administrative expenses of approximately $2,535,000, depreciation expense of approximately $2,176,000 and interest expense of approximately $776,000 resulting in a net loss of approximately $2,824,000.$190,000.

Other assets of $3,096,021 is primarily include approximately $1,670,000made up of $1,874,548 related to the Partnership’s Equipment Investment through SPV and of $597,250 related to equipment investment through SPV.held off lease by SQN Helo.

In connection with the consolidation of SQN Helo, the Partnership had an aggregate equipment notes payable balance of $3,669,521 to a financial institution for four helicopter leases. In January 2017, the Partnership paid $3,325,506 as repayment in full for three helicopter leases. As of September 30, 2017, the equipment notes payable was $0.

On April 22, 2016, Juliet, a third party and the third party’s affiliate amended and restated the participation agreement dated December 29, 2015. Juliet borrowed a total of approximately $14,621,000 in the form of a senior participation instruments with a third party and the third party’s affiliate consisting of the outstanding principal payable balance of approximately $2,124,000 on the Just Loans transaction, the third party also funded Juliet additional cash of approximately $8,511,000 and assigned their interests of approximately $3,986,000 in a loan facility for a wood pellet business in Texas. The senior participation instrument accrues interest at the rate of 6% per annum and also accrues PIK interest at the rate of 1.5% per annum. The senior participants, as collateral, have a first priority security interest in all of the assets acquired by Juliet as well as a senior participation interest in all of the proceeds from the assets, while Juliet has a junior participation interest until the loan is repaid in full. All of the cash proceeds received from these assets are applied as follows (1), to pay accrued and unpaid interest of the senior participant, (2), to pay any cumulative interest shortfall of the senior participant, (3), to pay accrued and unpaid interest of the junior participants, and (4), to reduce the outstanding principal balance of the senior participation with any excess distributed to the junior participants. There was no stated or agreed upon repayment term for the principal. On May 5, 2016, the third party provided additional financing, on behalf of Juliet, in the amount of approximately $2,926,000 after applicable exchange rates.

In connection with the CONT Feeder transaction, Marine borrowed $7,500,000 and $9,604,091 in the form of a senior participation instruments with a third party and the third party’s affiliate. The senior participation instrument accrues interest at the rate of 10% per annum and matures on December 16, 2020. The senior participants, as collateral, have a first priority security interest in all of the assets acquired by CONT Feeder as well as a senior participation interest in the proceeds from the assets, while Marine has a junior participation interest until the loan is repaid in full. All of the cash proceeds received from these assets will be applied first against the outstanding principal balance of the senior participation with any excess distributed to the junior participants. There was no stated or agreed upon repayment term for the principal.

In connection with the acquisition of container vessels, CONT Feeder borrowed $14,375,654 from third parties. As of September 30, 2017,March 31, 2018, the CONT Feeder loan payable was $11,264,375.$10,203,742.

In connection with the consolidation of SQN Helo, the Partnership had an aggregate loans payable balance of $9,245,578 to SQN AFIF and to a third party in the form of a senior participation instruments. The senior participation instrument accrues interest at the rate of 7% per annum and PIK interest at the rate of 3.5% per annum and matures on January 6, 2022. The senior participants, as collateral, have a first priority security interest in all of the assets acquired by SQN Helo as well as a senior participation interest in the proceeds from the assets, while the Partnership and SQN PAC have a junior participation interest until the loan is repaid in full. All of the cash proceeds received from these assets will be applied first against the outstanding principal balance of the senior participation with any excess distributed to the junior participants. There was no stated or agreed upon repayment term for the principal.

The Partnership’s carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and other liabilities, approximate fair value due to their short term until maturities.

The Partnership’s carrying values and approximate fair values of its financial instruments were as follows:

As of September 30, 2017,March 31, 2018, the Partnership evaluated the carrying values of its financial instruments and they approximate fair values.

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For the ninethree months ended September 30, 2017, the Partnership had two lessees which accounted for approximately 56% and 42% of the Partnership’s rental income derived from operating leases. For the nine months ended September 30, 2016,March 31, 2018, the Partnership had one lesseelease which accounted for approximately 100% of the Partnership’s rental income derived from operating leases. For the ninethree months ended September 30,March 31, 2017, the Partnership had two lessees which accounted for approximately 49% and 47% of the Partnership’s rental income derived from operating leases. For the three months ended March 31, 2018, the Partnership had three leases which accounted for approximately 49%, 19%, and 19% of the Partnership’s income derived from finance leases. For the three months ended March 31, 2017, the Partnership had three leases which accounted for approximately 31%35%, 31% and 20%21% of the Partnership’s income derived from finance leases. For the ninethree months ended September 30, 2016,March 31, 2018, the Partnership had four leasesthree notes/loans which accounted for approximately 38%22%, 16%, 15%20% and 14%12% of the Partnership’s income derived from finance leases.interest income. For the ninethree months ended September 30,March 31, 2017, the Partnership had four leases which accounted for approximately 18%22%, 14%12%, 13%12%, and 11% of the Partnership’s interest income. For the nine months ended September 30, 2016, the Partnership had three leases which accounted for approximately 16%, 16% and 10% of the Partnership’s interest income.

At September 30,March 31, 2018, the Partnership had three lessees which accounted for approximately 29%, 26%, 18% and 13% of the Partnership’s investment in finance leases. At March 31, 2017, the Partnership had four lessees which accounted for approximately 33%22%, 20%19%, 18% and 10% of the Partnership’s investment in finance leases. At September 30, 2016, the Partnership had five lessees which accounted for approximately 29%, 25%, 15%, 11% and 10% of the Partnership’s investment in finance leases. At September 30, 2017,March 31, 2018, the Partnership had one lessee which accounted for approximately 100% of the Partnership’s investment in operating leases. At September 30, 2016,March 31, 2017, the Partnership had one lesseetwo lessees which accounted for approximately 100%68% and 29% of the Partnership’s investment in operating leases. At September 30, 2017,March 31, 2018, the Partnership had four lesseesnotes which accounted for approximately 36%35%, 29%31%, 16%14% and 11%12% of the Partnership’s investment in equipment notes receivable. At September 30, 2016,March 31, 2017, the Partnership had fourthree lessees which accounted for approximately 27%36%, 25%, 15%30% and 11%16% of the Partnership’s investment in equipment notes receivable. At September 30, 2017,March 31, 2018, the Partnership had four lesseesloans which accounted for approximately 32%31%, 16%, 13%16% and 10% of the Partnership’s investment in collateralized loans receivable. At September 30, 2016,March 31, 2017, the Partnership had fourthree lessees which accounted for approximately 23%25%, 15%, 14%19% and 10%15% of the Partnership’s investment in collateralized loans receivable. At September 30,March 31, 2018 and 2017, the Partnership had one lessee which accounted for approximately 100% of the Partnership’s investment in residual value leases. At September 30, 2016, the Partnership had one lessee which accounted for approximately 100% of the Partnership’s investment in residual value leases.

Geographic information for revenue for the three months ended September 30,March 31, 2018 and 2017 and 2016 was as follows:

Geographic information for revenue for the nine months ended September 30, 2017 and 2016 was as follows:

Geographic information for long-lived assets at September 30, 2017March 31, 2018 and December 31, 20162017 was as follows:

On November 8, 2017,April 30, 2018, the Partnership through Juliet, funded an additional $552,252$604,720 under a wholesale financing arrangement with an international leasing company that does business between the United States and Mexico.

Item 2. General Partner’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include SQN AIF IV, L.P. and its subsidiaries.

The following is a discussion of our current financial position and results of operations. This discussion should be read together with the financial statements and notes in our Form 10-K, filed on March 31, 2017.2018. This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements” and the “Risk Factors” set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Forward-Looking Statements

Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,” “seek,” “plan,” or “project” and variations of these words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected. We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

We were organized asare a Delaware limited partnership formed on August 10, 2012 and are engaged in2012. Our fund operates under a single business segment,structure which we pool the ownership and investment in leased equipment and related financings which includes: (i) purchasing equipment and leasing itcapital invested by our partners. This pool of capital is then used to third-party end users; (ii) providing equipment and other asset financing; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. We will terminate no later than December 31, 2036.

The General Partner of the Partnership is SQN AIF IV GP, LLC (the “General Partner”), a wholly-owned subsidiary of the Partnership’s Investment Manager, SQN Capital Management, LLC (the “Investment Manager”). Both the Partnership’s General Partner and its Investment Manager are Delaware limited liability companies. The General Partner manages and controls the day to day activities and operations of the Partnership, pursuant to the terms of the Partnership Agreement. The General Partner paid an aggregate capital contribution of $100 for a 1% interest in the Partnership’s income, losses and distributions. The Investment Manager makes all investment decisions and manages the investment portfolio of the Partnership.

Our Offering period commenced on April 2, 2013 and concluded on April 2, 2016, which is three years from the commencement of our Offering Period.

Our income, losses and distributions are allocated 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have received total distributions equal to their capital contributions plus an 8% per year, compounded annually, cumulative return on their capital contributions. After such time, all distributable cash will be allocated 80% to the Limited Partners and 20% to the General Partner. We are currently in the Operating and Liquidation Period. The Offering Period concluded on April 2, 2016, which is three years from the date we were declared effective by the SEC. During the Operating Period, we will invest most of the net proceeds from our offering in business-essential, revenue-producing (or cost-saving) equipment and other physical assets with substantial economic lives and, in many cases, associated revenue streams and project financings. The Operating Period began on the date of our initial closing, which occurred on May 29, 2013pooled capital contributions are also used to pay fees and will last for three years unless extended at the sole discretion of the General Partner. The General Partner has extended the Operating Period for an additional one year. The Liquidation Period, which began on May 30, 2017, is the period in which we will sell our assets in the ordinary course of business and will last two years, unless it is extended, at the sole discretion of the General Partner.

SQN Securities, LLC (“Securities”), a majority-owned subsidiary of the Investment Manager, is currently acting as our exclusive selling agent. We may engage additional selling agents in the future. We pay 3% of the gross proceeds of the offering (excluding proceeds, if any, we receive from the sale of its Units to the General Partner or its affiliates) to its selling agent or selling agents as an underwriting fee. In addition, we will pay a 7% sales commission to broker-dealers unaffiliatedexpenses associated with our General Partner who will be selling our Units, on a best efforts basis. When Units are not sold by unaffiliated broker-dealers, the 7% sales commission is not required to be paid. We apply the proceeds that would otherwise be payable as Sales Commission toward the purchase of additional fractional Units at $1,000 per Unit.

During our Operating Period, which began on May 29, 2013, the date of our initial closing, we will use the majority of our net offering proceeds from Limited Partner capital contributions to acquire our initial investments. As our investments mature, we anticipate reinvesting the cash proceeds in additional investments in leased equipment and project financing transactions, to the extent that the cash will not be needed for expenses, reserves and distributions to our limited partners. During this time-frame we expect both rental income and finance income to increase substantially as well as related expenses such as depreciation and amortization. During the Operating Period we believe the majority of our cash outflows will be from investing activities as we acquire additional investmentsorganization and to fund a lesser extend from financing activities from our paying quarterly distributions to our limited partners. Our cash flow from operations is expected to increase, primarily from the collection of rental payments.

During the nine months ended September 30, 2017, we made distributions to our Limited Partners totaling $2,956,519.capital reserve.

Our principal investment strategy is to invest in business-essential, revenue-producing (or cost-savings) equipment with high in-place value and long, relative to the investment term, economic life and project financings. We expect to achieve our investment strategy by making investments in equipment already subject to lease or originating equipment leases in such equipment, which will include: (i) purchasing equipment and leasing it to third-party end users; (ii) providing equipment and other asset financing; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. From time to time, we may also purchase equipment and sell it directly to our leasing customers.

Many of our investments will be structured as full payout or operating leases. Full payout leases generally are leases under which the rent over the initial term of the lease will return our invested capital plus an appropriate return without consideration of the residual value, and where the lessee may acquire the equipment or other assets at the expiration of the lease term. Operating leases generally are leases under which the aggregate non-cancelable rental payments during the original term of the lease, on a net present value basis, are not sufficient to recover the purchase price of the equipment or other assets leased under the lease.

We also intend to invest by way of participation agreements and residual sharing agreements where we would acquire an interest in a pool of equipment or other assets, or rights to the equipment or other assets, at a future date. We may invest in operating companies that use or own equipment and other assets. We also may structure investments as project financings that are secured by, among other things, essential use equipment and/or assets. Finally, we may use other investment structures that our Investment Manager believes will provide us with the appropriate level of security, collateralization, and flexibility to optimize our return on our investment while protecting against downside risk, such as vendor and rental programs. In many cases, the structure will include us holding title to or a priority or controlling position in the equipment or other asset.

Although the final composition of our portfolio cannot be determined at this stage, we expect to invest in equipment and other assets that are considered essential use or core to a business or operation in the agricultural, energy, environmental, medical, manufacturing, technology, and transportation industries. Our Investment Manager may identify other assets or industries that meet our investment objectives. We expect to invest in equipment, other assets and project financings located primarily within the United States of America and the European Union but may also make investments in other parts of the world.

Our General Partner, our Investment Manager and their affiliates, including Securities in its capacity as our selling agent and certain non-affiliates (namely, Selling Dealers) received fees and compensation from the offering of our Units, including the following, with any and all compensation paid to our General Partner solely in cash. We paid an underwriting fee of 3% of the gross proceeds of this offering (excluding proceeds, if any, we received from the sale of our Units to our General Partner or its affiliates) to our selling agent or selling agents.

Our General Partner receives an organizational and offering expense allowance of up to 2% of our offering proceeds to reimburse it for expenses incurred in preparing us for registration or qualification under federal and state securities laws and subsequently offering and selling our Units. The organizational and offering expense allowance will be paid out of the proceeds of this offering. The organizational and offering expense allowance will not exceed the actual fees and expenses incurred by our General Partner and its affiliates. Because organizational and offering expenses will be paid as and to the extent they are incurred, organizational and offering expenses may be drawn disproportionately to the gross proceeds of each closing.

During our Operating Period and our Liquidation Period, our Investment Manager receives a management fee in an amount equal to the greater of (i) 2.5% per annum of the aggregate offering proceeds, or (ii) $125,000, payable monthly, until such time as an amount equal to at least 15% of our Limited Partners’ capital contributions has been returned to them, after which the monthly management fee will equal 100% of the management fee as initially calculated above, less 1% for each additional 1% of our Limited Partners’ capital contributions returned to them, such amounts to be measured on the last day of each month.

Our General Partner will initially receive 1% of all distributed distributable cash. Our General Partner has a Promotional Interest in us equal to 20% of all distributed distributable cash after we have provided a return to our Limited Partners of their respective capital contributions plus an 8% per annum, compounded annually, cumulative return on their capital contributions.

Recent Significant Transactions

Motion Picture ProductionInternational Leasing Company

On July 20, 2017,During the three months ended March 31, 2018, the Partnership through Juliet, provided securedfunded an additional total of $580,216 under this wholesale financing in the amount of $3,867,435 after applicable exchange rates for a motion picture production company in the United Kingdom.arrangement. The loan is secured by all of the assets, including tax credits, of the borrower and all of the borrower’s rights to proceeds from the motion picture. The loan accruesloans accrue interest at a rate of 12%10% per annum and is scheduledare secured by industrial and manufacturing equipment subject to mature 24 months after the funding date.

Surplus Loan Noteequipment leases.

Critical Accounting Policies

An understanding of our critical accounting policies is necessary to understand our financial results. The preparation of condensed consolidated financial statements in accordance with U.S. GAAPaccounting principles generally accepted in the United States of America requires our General Partner and our Investment Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates will primarily include the determination of allowance for doubtful lease, notes and loan accounts,leases, depreciation and amortization, impairment losses and the estimated useful lives and residual values of the leased equipment we acquire. Actual results could differ from those estimates.

Lease Classification and Revenue Recognition

Each equipment lease we enter into is classified as either a finance lease or an operating lease, which is determined at lease inception, based upon the terms of each lease, or when there are significant changes to the lease terms. We capitalize initial direct costs associated with the origination and funding of lease assets. Initial direct costs include both internal costs (e.g., labor and overhead), if any, and external broker fees incurred with the lease origination. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as incurred as acquisition expense. For a finance lease, initial direct costs are capitalized and amortized over the lease term using the effective interest rate method. For an operating lease, the initial direct costs are included as a component of the cost of the equipment and depreciated over the lease term.

For finance leases, we record, at lease inception, the total minimum lease payments receivable from the lessee, the estimated unguaranteed residual value of the equipment at lease termination, the initial direct costs related to the lease, if any, and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable, plus the estimated unguaranteed residual value, minus the cost of the leased equipment. Unearned income is recognized as finance income over the term of the lease using the effective interest rate method.

For operating leases, rental income is recognized on the straight-line basis over the lease term. Billed operating lease receivables are included in accounts receivable until collected. Accounts receivable is stated at its estimated net realizable value. Deferred revenue is the difference between the timing of the receivables billed and the income recognized on the straight-line basis.

Our Investment Manager has an investment committee that approves each new equipment lease and other project financing transaction. As part of its process, the investment committee determines the residual value, if any, to be used once the investment has been approved. The factors considered in determining the residual value include, but are not limited to, the creditworthiness of the potential lessee, the type of equipment considered, how the equipment is integrated into the potential lessee’s business, the length of the lease and the industry in which the potential lessee operates. Residual values are reviewed for impairment in accordance with our impairment review policy.

The residual value assumes, among other things, that the asset will be utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. The residual value is calculated using information from various external sources, such as trade publications, auction data, equipment dealers, wholesalers and industry experts, as well as inspection of the physical asset and other economic indicators.

Asset Impairments

The significant assets in our investment portfolio are periodically reviewed, no less frequently than annually or when indicators of impairment exist, to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss will be recognized only if the carrying value of a long-lived asset is not recoverable and exceeds its fair value. If there is an indication of impairment, we will estimate the future cash flows (undiscounted and without interest charges) expected from the use of the asset and its eventual disposition. Future cash flows are the future cash in-flows expected to be generated by an asset less the future out-flows expected to be necessary to obtain those in-flows. If an impairment is determined to exist, the impairment loss will be measured as the amount by which the carrying value of a long-lived asset exceeds its fair value and recorded in the statement of operations in the period the determination is made.