T&W FINANCIAL CORP, S-1/A, 1997-09-30

T&W FINANCIAL CORP
S-1/A, 1997-09-30
MISCELLANEOUS BUSINESS CREDIT INSTITUTION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997

REGISTRATION NO. 333-34123

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT

UNDER
THE SECURITIES ACT OF 1933
------------------------

T&W FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
WASHINGTON 6159 91-1844249
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

6416 PACIFIC HIGHWAY EAST, TACOMA, WASHINGTON, 98424, (253) 922-5164
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MICHAEL A. PRICE, CHIEF EXECUTIVE OFFICER

6416 PACIFIC HIGHWAY EAST, TACOMA, WASHINGTON, 98424, (253) 922-5164
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

WITH COPIES TO:

<TABLE>
<S> <C>
JAMES E. TOPINKA, ESQ. TODD H. BAKER, ESQ.
GRAHAM & JAMES LLP GIBSON, DUNN & CRUTCHER LLP
ONE MARITIME PLAZA, SUITE 300 ONE MONTGOMERY STREET, SUITE 3100
SAN FRANCISCO, CALIFORNIA SAN FRANCISCO, CALIFORNIA
94111-3492 94104-4505
TELEPHONE: (415) 954-0200 TELEPHONE: (415) 393-8200
</TABLE>

------------------------

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1997

2,560,000 SHARES
LOGO - T&W FINANCIAL CORPORATION
COMMON STOCK
------------------------

Of the 2,560,000 shares of common stock (the "Common Stock") offered hereby
(the "Offering"), 2,200,000 shares are being sold by T&W Financial Corporation
("T&W" or the "Company") and 360,000 shares are being sold by selling
shareholders (the "Selling Shareholders"). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Shareholders.

Prior to this Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that any active trading market will
develop. It is currently anticipated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the determination of the initial public offering price.

Application will be made to list the Common Stock for quotation on the
Nasdaq National Market ("Nasdaq") under the symbol "TWFC."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C> <C>
======================================================================================================
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)...................... $ $ $ $
======================================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.

(2) Before deducting expenses of the Offering payable by the Company estimated
at $700,000.

(3) The Company has granted the Underwriters an option, exercisable from time to
time within 30 days from the date hereof, to purchase up to 384,000
additional shares of Common Stock at the Price to Public per share, less the
Underwriting Discount, solely for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates representing the shares of Common Stock
will be made against payment on or about , 1997 at the office
of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York,
New York 10281.
------------------------

OPPENHEIMER & CO., INC. PRUDENTIAL SECURITIES INCORPORATED

The date of this Prospectus is , 1997
<PAGE> 3

ADDITIONAL INFORMATION

The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. The Company has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-1 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the offer and sale of Common Stock pursuant to
this Prospectus. This Prospectus, filed as a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
or the exhibits and schedules thereto in accordance with the rules and
regulations of the Commission and reference is hereby made to such omitted
information. Statements made in this Prospectus concerning the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement are summaries of the terms of such contracts, agreements or documents.
Reference is made to each such exhibit for a more complete description of the
matters involved and such statements shall be deemed qualified in their entirety
by such reference. The Registration Statement and the exhibits and schedules
thereto filed with the Commission may be inspected, without charge, and copies
may be obtained at prescribed rates, at the public reference facility maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Registration
Statement and other information filed by the Company with the Commission are
also available at the web site maintained by the Commission on the World Wide
Web at http://www.sec.gov. For further information pertaining to the Company and
the Common Stock offered by this Prospectus, reference is made to the
Registration Statement.

The Company intends to furnish its shareholders with annual reports
containing financial statements audited by its independent accountants and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Prospective
purchasers of shares of Common Stock offered hereby should carefully consider
the factors set forth under "Risk Factors." Unless otherwise specified, the
information in this Prospectus assumes that the Underwriters do not exercise the
overallotment option described herein under "Underwriting." Unless the context
otherwise requires, (i) the information set forth in this Prospectus gives
effect to the proposed transactions described herein under "The Restructuring"
(the "Restructuring"), and (ii) the terms "Company" and "T&W" mean T&W Financial
Corporation, its predecessors and its affiliates after giving effect to such
transactions.

THE COMPANY

T&W Financial Corporation is a specialized commercial finance company that
provides equipment financing, principally in the form of leases, to small and
medium-sized businesses. The Company originates leases through direct
relationships with selected leading equipment manufacturers, distributors and
industry cooperatives ("Equipment Providers") that generally offer the Company's
leasing services as a preferred method of financing equipment sales. The Company
also originates leases through referrals from financial institutions and other
lessors. The Company is a "credit lender" and, as such, its underwriting
policies and procedures focus on the creditworthiness of the lessee rather than
the value of the equipment financed. The Company concentrates on "prime
credits," which it defines as lessees that have been under the same ownership
for at least 10 years and have a record of meeting their financial obligations.
T&W has been continuously engaged in the leasing business since 1976, and as of
June 30, 1997, the Company's portfolio of leases serviced totaled $174.7 million
and included over 7,200 leases.

The Company focuses on financing equipment with a purchase price of less
than $250,000 ("small ticket" equipment leases) in various industries, including
fast food franchises, independent grocery stores, funeral homes, hospitality,
liquid waste disposal and horticulture. As of June 30, 1997, these six
industries accounted for approximately 46.2% of the Company's portfolio of
leases serviced. The Company finds these industries attractive because lessees
in these industries generally have credit characteristics favored by the Company
and the equipment financed is generally not subject to obsolescence within the
lease term. By utilizing dedicated marketing teams to service and expand its
penetration within a particular industry, the Company is able to develop
long-term relationships with Equipment Providers, which generates a continuing
source of new lease originations. The Company maintains a diversified portfolio
in order to minimize its credit exposure to any single industry or individual
lessee. As of June 30, 1997, no single industry accounted for more than 12.2% of
the Company's portfolio of leases serviced and no single lessee accounted for
more than 3% of its portfolio of leases serviced. The average annualized yield
on the Company's portfolio of leases serviced for the six months ended June 30,
1997 was 12.7%. For leases originated in the first six months of 1997, the
average contractual yield was 12.4%, the average term was 44 months and the
average equipment cost was $39,200.

In recent years, the Company has achieved strong growth in lease
originations and net income. The Company's lease originations increased from
$9.8 million for 1992 to $80.6 million for 1996; lease originations increased
from $31.4 million for the six months ended June 30, 1996, to $49.2 million for
the comparable period for 1997. The Company's net income increased from $1.2
million for 1992 to $5.8 million for 1996; net income increased from $2.4
million for the six months ended June 30, 1996, to $3.2 million for the
comparable period for 1997. The Company's pro forma net income (after giving
effect to the Restructuring) was $3.2 million for 1996 and $1.7 million for the
six months ended June 30, 1997. See "The Restructuring." A key element of the
Company's growth has been its access to funding, principally through
securitizations. Through June 30, 1997, the Company has raised $196.9 million
through securitizations. Prior to 1997, the Company structured such
securitizations as financings for financial reporting purposes. Beginning in
1997, the Company has structured such securitizations as sales for financial
reporting purposes, in accordance with the

3
<PAGE> 5

new accounting standard for the transfer of financial assets (Statement of
Financial Accounting Standard ("SFAS") No. 125).

Leasing represents a large and growing source of financing for businesses.
According to the Equipment Leasing Association of America (the "ELA"), the
financing of capital equipment by businesses through leasing increased from
approximately $122 billion in 1992 to approximately $169 billion in 1996. The
Company believes that "small ticket" equipment leasing is one of the most
rapidly growing segments of the industry primarily due to: (i) the increasing
acceptance of leasing by small and medium-sized businesses as a means of
financing the acquisition of capital equipment; (ii) the consolidation of the
banking industry, which has led to diminished service to small and medium-sized
businesses; and (iii) the recognition by small and medium-sized businesses that
specialized commercial finance companies such as T&W can provide faster and more
direct service than traditional financial institutions.

The Company attributes its strong financial performance to adherence to a
consistent operating strategy. The Company's operating strategy is to: i)
provide on-going, high quality service and support to Equipment Providers and
lessees; ii) maintain strong credit quality; iii) access low-cost funding
through securitizations; and iv) maintain efficient operations and relatively
low overhead costs. The Company believes that its operating strategy provides
multiple opportunities for continued growth. The Company's growth strategy is
to: i) finance additional types of equipment in industries it currently serves;
ii) develop strategic alliances with leading Equipment Providers to finance a
higher share of their equipment sales; iii) continue expansion within its
existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. As part of its expansion strategy, in June 1997, the Company
acquired the assets of Commercial Capital Corporation ("Commercial Capital"), a
specialized commercial lease finance company located near Kansas City, Missouri.

After the Restructuring, T&W Financial Corporation will become the manager
of, and will own an 85% membership interest in, T&W Financial Services Company
L.L.C., a recently formed Washington limited liability company (the "LLC"). The
remaining 15% membership interest in the LLC will be owned by a limited
liability company owned by the senior management of the Company. The LLC will
conduct all of the Company's leasing business. As a result of the Restructuring,
the Company will become subject to income taxes. See "Summary Combined Financial
and Operating Data," "The Restructuring" and "Certain Transactions -- T&W
Funding Company VI, LLC."

The principal executive office of the Company is located at 6416 Pacific
Highway East, Tacoma, Washington, 98424, and its telephone number is (253)
922-5164.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......... 2,200,000 shares
Common Stock offered by the Selling
Shareholders.............................. 360,000 shares(1)
Common Stock outstanding after the
Offering.................................. 8,000,000 shares(2)
Use of proceeds............................. For the repayment of certain bank and
affiliate lines of credit and for general
corporate purposes, including working
capital to fund expansion of its leasing
business. See "Use of Proceeds."
Proposed Nasdaq symbol...................... "TWFC"
</TABLE>

- ---------------

(1) The Selling Shareholders intend to use substantially all of their proceeds
to repay certain obligations to the Company. See "Certain
Transactions -- Certain Relationships Terminating at Closing."

(2) Excludes 1,000,000 shares of Common Stock reserved for issuance upon
exercise of options under the Company's 1997 Stock Option Plan; 100,000
shares of Common Stock reserved for issuance under the Company's 1997
Employee Stock Purchase Plan; 10,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Director Stock Grant Plan; and
13,700 shares of Common Stock to be awarded to employees of the Company
following the Offering. No options or shares of Common Stock are currently
outstanding under such plans but the Company has the obligation to grant
options at the initial public offering price for 22,000 shares of Common
Stock to each of James R. Neese and Larry E. Rice as a result of the
Commercial Capital acquisition. See "Business -- Recent Acquisition" and
"Management -- Benefit Plans."

5
<PAGE> 7

SUMMARY COMBINED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997(1)
------ ------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lease contract revenue........... $3,162 $4,286 $7,132 $10,621 $16,834 $6,944 $7,298
Gain on sale of leases........... -- -- -- -- -- -- 3,448(2)
Fee income....................... 976 567 607 1,364 2,067 1,099 134
Servicing and other income....... 344 256 292 555 595 517 738
------ ------ ------ ------ ------ ------ ------
Total revenues........... 4,482 5,109 8,031 12,540 19,496 8,560 11,618
------ ------ ------ ------ ------ ------ ------
Expenses:
Interest expense................. 1,490 1,577 2,589 4,513 6,434 2,911 3,726
Compensation and related
expenses...................... 814 948 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct
costs......................... 337 640 848 1,302 1,893 854 1,222
Provision for credit losses...... 107 172 223 621 1,137 345 402
Other general and administrative
expenses...................... 507 627 601 807 1,345 757 1,073
------ ------ ------ ------ ------ ------ ------
Total expenses........... 3,255 3,964 5,745 9,039 13,668 6,172 8,409
------ ------ ------ ------ ------ ------ ------
Net income......................... $1,227 $1,145 $2,286 $3,501 $5,828 $2,388 $3,209
====== ====== ====== ====== ====== ====== ======
PRO FORMA AMOUNTS(3):
Income before minority interest
and income taxes.............. $5,828 $3,209
Minority interest................ (874) (481)
------ ------
Income before income taxes....... 4,954 2,728
Provision for income taxes....... (1,783) (982)
------ ------
Net income....................... $3,171 $1,746
====== ======
Net income per share............. $0.55 $0.30
Weighted average number of shares
of Common Stock and Common
Stock equivalent shares
outstanding................... 5,800 5,800
</TABLE>

- ---------------

(1) Includes operating results relating to Commercial Capital for the period
since its acquisition on June 2, 1997. See "Business -- Recent Acquisition."

(2) Beginning in 1997, the Company has structured its securitizations as sales
for financial reporting purposes. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."

(3) Pro forma operating results reflect adjustments to historical results as of
the beginning of the periods presented for (a) the inclusion of a 15%
minority interest in the LLC in connection with the Restructuring and (b)
income taxes as if the Company had been treated as a taxable entity rather
than an affiliated group of pass-through entities. See "The Restructuring"
and Notes to the T&W Financial Corporation and Affiliates Financial
Statements.

6
<PAGE> 8

SUMMARY COMBINED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997(1)
------------------------------- -------------------------
1994 1995 1996 ACTUAL PRO FORMA(2)
------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $4,145 $4,323 $8,064 $8,861 $8,861
Net investment in leases...................... 56,060 90,359 135,087 103,890 103,890
Total assets.................................. 61,242 96,051 144,437 124,180 124,180
Notes payable -- recourse..................... 11,481 8,833 32,272 17,659 17,659
Notes payable -- non-recourse................. 36,014 67,686 89,975 80,804 80,804
Total liabilities............................. 53,775 86,501 134,140 112,016 115,516
Shareholders' equity.......................... 7,467 9,550 10,297 12,164
Pro forma deferred income tax liability....... 3,500
Pro forma minority interest................... 1,825
Pro forma shareholders' equity................ 6,839
</TABLE>

<TABLE>
<CAPTION>
AT OR FOR THE SIX
AT OR FOR THE YEAR MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Lease financing
receivables originated:
Number of contracts.... 711 993 1,488 1,370 3,630 2,609 1,257
Lease
originations(3)...... $9,833 $21,703 $34,290 $55,348 $80,638 $31,370 $49,245
Leases serviced:
Number of contracts.... 1,610 2,554 3,517 4,086 6,983 6,349 7,255
Portfolio of leases
serviced(4).......... $21,649 $38,436 $61,797 $97,772 $148,086 $119,156 $174,729
Average portfolio
yield(5)............. 19.8% 16.3% 16.1% 14.7% 15.2% 14.2% 12.7%(6)
Credit quality
statistics:
Delinquencies as a
percentage of
portfolio of leases
serviced
31-60 days........... 4.40% 2.50% 2.52% 1.50% 2.89% 2.48% 1.19%
61-90 days........... 1.40% 0.31% 0.42% 0.86% 1.38% 0.71% 1.24%
91-120 days.......... 0.47% 0.10% 0.15% 0.78% 0.32% 0.63% 0.98%
Over 120 days........ -- 0.99% 0.90% -- 1.04% 0.60% 0.96%
------- ------- ------- ------- -------- -------- --------
Total........... 6.27% 3.90% 3.99% 3.14% 5.63% 4.42% 4.37%
Net charge-offs(7)..... 0.36% 0.09% 0.02% 0.39% 0.64% 0.09% 0.27%
</TABLE>

- ---------------

(1) Includes assets and liabilities of Commercial Capital.

(2) Pro forma balance sheet data reflects adjustments to historical amounts for
(a) the inclusion of a 15% minority interest in the LLC in connection with
the Restructuring, and (b) estimated deferred income tax liabilities as if
the Company had been treated as a taxable entity rather than an affiliated
group of pass-through entities. See "The Restructuring" and Notes to the T&W
Financial Corporation and Affiliates Financial Statements.

(3) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.

(4) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.

(5) Represents the average yield recognized during the period for the portfolio
of leases serviced.

(6) Represents the average yield recognized during the period for the portfolio
of leases serviced, determined on a basis as if all securitizations in 1997
had been structured as financing transactions. Yield does not give effect to
revenues or leases attributable to Commercial Capital. During the six months
ended June 30, 1997, the Company's average estimated residual income
inherent in lease contracts has decreased from prior years, causing a
decrease in total yield.

(7) Represents charge-offs (reduced by recoveries), divided by the respective
period's average minimum lease payments, including residuals, under all
leases serviced in the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.

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<PAGE> 9

RISK FACTORS

Investment in the Common Stock offered hereby involves a high degree of
risk, including the risks described below. Prospective investors should
carefully consider the risk factors set forth below, as well as other
information included in this Prospectus before making an investment decision
concerning the Common Stock.

This Prospectus contains certain "forward-looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance and the Company's operations,
performance, financial condition, prospects, growth and strategies. For this
purpose, any statements contained in this Prospectus except for historical
information may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important
factors, including those described below in this "Risk Factors" section and
elsewhere in this Prospectus.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires a substantial amount of cash to implement its business
strategy, including, without limitation, cash to: (i) finance the purchase of
equipment that it leases; (ii) pay the fees and expenses incurred in the
securitization of leases; (iii) pay the fees and interest expense under its bank
lines of credit; (iv) pay operating expenses; and (v) satisfy working capital
requirements. These cash requirements will increase as the Company's lease
originations increase. No assurance can be given that the Company will have
access to the capital markets in the future for equity or debt issuances or for
securitizations or that financing through bank lines of credit or other means
will be available on acceptable terms to satisfy the Company's cash
requirements. The Company's inability to access the capital markets or obtain
acceptable financing could have a material adverse effect on the Company's
results of operations, financial condition and prospects. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DEPENDENCE ON SECURITIZATIONS

GENERAL. The Company finances a majority of its lease originations
utilizing securitizations. The Company has utilized several structures in its
securitizations. The Company's current lease securitization structure is a
commercial paper based conduit facility in which the Company contributes its
leases (including related residuals) to a special purpose limited liability
entity. Such entity sells the leases to an owner trust and the owner trust then
sells certificates backed by the leases to an unaffiliated special purpose
corporate entity which administers a multi-seller commercial paper conduit
facility. Beginning in 1997, the gain on the sale of such leases represented a
significant portion of the Company's revenues. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview" and
"-- Liquidity and Capital Resources."

RELIANCE ON SECURITIZATION MARKET. The Company is dependent on
securitizations to generate cash proceeds for repayment of advances under its
bank lines of credit and for working capital. Several factors affect the
Company's ability to complete securitizations of its leases, including
conditions in the securities markets generally, conditions in the asset-backed
securities markets specifically, the credit quality and performance of the
Company's portfolio of leases serviced, compliance of the Company's leases with
the eligibility requirements established by the securitization documents and
rating agencies, the Company's ability to adequately service its portfolio of
leases and the absence of any material downgrading or withdrawal of ratings
given to certificates. A reduction in the demand for the Company's leases in the
securitization market or an adverse change in the terms of the Company's
securitizations could limit or eliminate the Company's ability to securitize
leases profitably and could have a material adverse effect on the Company's
financial condition, results of operations and prospects.

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<PAGE> 10

POTENTIAL CHANGE IN SECURITIZATION RECEIVABLE. The Company sells each pool
of leases for a price equal to the present value of future cash flows, including
guaranteed residuals. Upon sale, the Company receives in cash a substantial
portion of the present value of future cash flows, with the remaining balance
held by the owner trust. Any such amount is included on the Company's balance
sheet as the securitization receivable. Recourse to the Company in such sales is
limited to the extent of the securitization receivable with respect to the
leases sold. The Company retains the servicing rights and responsibilities for
each pool of leases sold and receives as compensation normal servicing fees over
the life of such leases.

The securitization receivable is reduced by an allowance, which is
estimated by the Company to be adequate to cover future credit losses. No
allowance is made for estimated prepayments, which historically have been
insignificant due to the non-cancelable nature of the leases. The Company
evaluates the carrying value of the securitization receivable for each sale
transaction at the end of each reporting period in light of actual credit loss
experience of the underlying leases sold. The actual rate of credit losses is
influenced by a variety of economic and other factors, including, without
limitation, general economic conditions and business competition. See
" -- Dependence on Creditworthiness of Lessees and Portfolio Performance."
Consequently, there can be no assurance that the actual rate of credit losses on
the leases sold in the Company's securitizations will not exceed the Company's
estimates or historical experience. If the actual rate of credit losses is
higher than the Company's estimates, the Company will recognize an expense to
reduce the carrying value of the securitization receivable. The Company believes
that there is no active market for the sale of its securitization receivable.

There can be no assurance that future changes in the Company's
securitization structure or future actual credit loss levels will not have a
material adverse effect on the Company's financial condition, results of
operations and prospects. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

RELIANCE ON CREDIT ENHANCEMENTS. In order to gain access to the
securitization market, the Company has relied on credit enhancements provided by
monoline insurance carriers to guarantee the certificates issued by the owner
trust to enable it to obtain an investment grade rating for such certificates.
The cost of such credit enhancement results in a reduction in the gain on sale
of leases sold in a securitization. Any substantial reduction in the size or
availability of the securitization market for the Company's leases or the
unwillingness of insurance companies to guarantee the certificates issued by the
owner trust could have a material adverse effect on the Company's financial
condition, results of operations and prospects.

The documents governing some of the Company's securitizations require the
Company to build over-collateralization levels through retention of a portion of
the future cash flows and the application thereof to reduce the principal
balances of the certificates issued by the owner trust or to create reserve
funds. Such over-collateralization levels are pre-determined by the insurance
company issuing the guarantee of the certificates and are a condition to
obtaining an investment grade rating thereon. The application of a portion of
future cash flows to collateral causes the aggregate principal amount of the
leases and cash in the related lease pool to exceed the aggregate principal
balance of the certificates. Such excess amounts serve as a credit enhancement
for the owner trust and fund losses realized on leases held by such owner trust.
Accordingly, the Company continues to be subject to risks of delinquencies and
charge-offs following the sale of leases through securitizations to the extent
that cash flows are required to be retained or applied by the owner trust. In
addition, such retention slows and in some circumstances reduces over the life
of the related securitization, the flow of cash to the Company.

NO RECOURSE TO LEASES SECURITIZED. The Company is the originator and
servicer of the leases that it securitizes. However, legal and beneficial
ownership of securitized leases is held by the special purpose limited liability
entity and owner trust and such leases serve as collateral for the certificates
issued by the owner trust to the commercial paper conduit entity. The assets of
the special purpose limited liability entity and owner trust are not available
to pay creditors of the Company. Such leases are no longer owned by the Company,
and the Company's interest in such assets is limited to the amount of the
securitization receivable and servicing fees.

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DEPENDENCE ON BANK FINANCING

The Company uses bank lines of credit to fund leases pending inclusion in
the Company's securitizations and to fund leases for retention in the Company's
owned portfolio. Borrowings under the lines of credit are repaid with the
proceeds received by the Company from securitizations and revenue received by
the Company from leases. The Company will seek to obtain replacement or
additional sources of financing as its current lines of credit expire or become
fully utilized. However, there can be no assurance that such replacement or
additional financing will be available to the Company on favorable terms. The
inability of the Company to replace its existing credit facilities or to arrange
new credit facilities could have a material adverse effect on the Company's
financial condition, results of operations and prospects. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."

INTEREST RATE RISK

The Company's profitability is largely determined by the difference or
spread between the effective interest charged by the Company under its leases
and the interest paid by the Company under its lines of credit and
securitizations. The leases underwritten by the Company typically require
payments to be made by the lessee over a one to seven-year term at a fixed rate
of interest that is determined by rates prevailing in the market at the time of
lease approval. The Company finances the purchase of equipment that it leases
primarily through lines of credit and the securitization of pooled leases. All
of such lines of credit and certain of such securitizations require payments by
the Company at variable rates of interest that are subject to frequent
adjustment to reflect rates prevailing in the market for short-term borrowings.
Accordingly, an increase in interest rates due to inflation or other causes
could have a material adverse effect on the Company's financial condition,
results of operations and prospects by reducing or eliminating the spread
between the interest charged by the Company under its leases and the interest
paid by the Company under its credit facilities and variable rate
securitizations. Moreover, an increase in interest rates may cause the Company
to raise the rate of interest that it charges to lessees, thereby reducing the
demand for the Company's lease products. In addition, until the Company
securitizes its leases, it may fund the purchase of equipment and other costs of
such leases from lines of credit and working capital. An increase in interest
rates could have a material adverse effect on the Company's financial condition,
results of operations and prospects by reducing the gain on sale recognized by
the Company in future securitizations. The Company has entered into interest
rate collar agreements to hedge against the risk of significant increases in
interest rates. However, such hedging activities limit the Company's ability to
participate in the benefits of lower interest rates. In addition, there can be
no assurance that such hedging activities will adequately insulate the Company
from interest rate risks. See "-- Dependence on Securitizations" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Company discounts the estimated future cash flows related to the
securitization receivable at a discount rate that it believes is consistent with
the required risk-adjusted rate of return to an independent third-party
purchaser of the securitization receivable. If prevailing interest rates rise,
the required discount rate might also rise, thus potentially reducing the gain
on sale in future securitizations.

REDUCTION IN YIELD

As the Company grows, it is increasingly competing for somewhat larger
leases and leases with larger customers or groups of customers. The market for
such leases is more rate competitive than the Company's traditional leasing
business. Such factors have reduced and may in the future reduce the yield
obtained by the Company under its portfolio of leases serviced. See
"-- Competition" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations."

MANAGEMENT OF GROWTH

In recent years, the Company has expanded its business and experienced
significant growth in lease originations and in its portfolio of leases
serviced. In light of this growth, the historical performance of the Company's
earnings may be of limited relevance in predicting future performance. Any
credit or other

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<PAGE> 12

problems associated with the larger volume of leases originated in recent
periods will not become apparent until sometime in the future. Moreover, the
Company's ability to sustain continued growth is largely dependent on its
capacity to market, underwrite and service increasing volumes of leases with
acceptable yields and strong credit quality, and to maintain access to low-cost
funding through securitizations. Accomplishing this on a cost-efficient basis
will require the Company to increase its management, financial and
administrative resources, to make significant investments in technology to
support higher volumes of leases, to maintain high quality service in response
to competitive conditions, and to hire, train, supervise and manage new
employees. There can be no assurance that the Company will manage recent or
future growth effectively or that it will be successful in implementing
technological improvements or identifying, attracting and retaining qualified
personnel. The Company's failure to market its lease products effectively, to
maintain a portfolio with strong credit quality, to provide a high quality of
service and support or to maintain access to low-cost funding through
securitizations could have a material adverse effect on the Company's financial
condition, results of operations and prospects.

The Company's recent growth is not necessarily indicative of future results
and the Company may not maintain its historical rate of growth. The Company's
growth strategy is to: i) finance additional types of equipment in existing
industries; ii) develop strategic alliances with leading Equipment Providers to
finance a higher share of their equipment sales; iii) continue expansion within
its existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. See "Business -- Growth Strategy." The Company's failure to
achieve any or all of these goals could impair the Company's ability to grow and
have a material adverse effect on its financial condition, results of operations
and prospects.

DEPENDENCE ON CREDITWORTHINESS OF LESSEES AND PORTFOLIO PERFORMANCE

The Company focuses on financing "small ticket" equipment leases to small
and medium-sized businesses. Leases to small and medium-sized businesses may
entail a greater risk of non-performance and higher delinquencies and losses
than leases with larger lessees with greater financial resources. Although the
Company utilizes a credit grading model and conducts an independent credit
investigation of each lease applicant, no assurance can be given that its
underwriting guidelines will afford adequate protection against payment
delinquencies and charge-offs. In addition, despite careful underwriting the
Company may be subject to fraudulent acts by lessees. See "Business -- Legal
Proceedings." An increase in payment delinquencies and charge-offs would
negatively impact the Company's revenues. The failure by lessees to comply with
the terms of their leases would also result in the inability of such leases to
qualify to serve as collateral under the Company's bank lines of credit or as
part of the lease pool under the Company's securitizations, which could have a
material adverse effect on the Company's liquidity. In addition, an increase in
payment delinquencies and chargeoffs in excess of the levels estimated by
management in determining the Company's allowance for credit losses could cause
losses resulting from a write-down of the carrying value of the Company's
securitization receivable and limit or eliminate the Company's ability to obtain
institutional financing and effect securitizations, any of which would have a
material adverse effect on the Company's financial condition, results of
operations and prospects. See "-- Dependence on Securitizations" and
"Business -- Collection Procedures and Policies."

POTENTIAL CONFLICTS OF INTEREST BETWEEN THE COMPANY AND CERTAIN AFFILIATES

The Company has had, and subsequent to the Offering will continue to have,
certain relationships with Funding Company VI, PLM and their principals. For
example, the Company and Michael A. Price are parties to a lease agreement
pursuant to which the Company leases its current headquarters and related real
property

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<PAGE> 13

from Mr. Price. Although such lease expires in December 1997, the Company
intends to enter into new lease agreements with Mr. Price pursuant to which the
Company would lease its new headquarters on the same premises, as well as its
existing facilities from Mr. Price. See "Business -- Properties" and "Certain
Transactions -- Officers and Directors." The Company and PLM are parties to a
management services arrangement pursuant to which PLM provides management,
accounting, financial and other advisory services to the Company. Although such
arrangement will be terminated upon the closing of the Offering, the Company has
entered into another agreement with PLM, effective upon the closing of the
Offering, pursuant to which PLM would provide the Company with the services of
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. to
act as executive officers of the Company. See "Management -- Executive
Compensation" and "Certain Transactions -- P.L.M. Consulting Group, L.L.C."

PLM and its principals also hold investments in certain businesses which
have had, and subsequent to the Offering will continue to have, certain
relationships with the Company. For example, PLM owns a significant part of
Universal Metering L.L.C. ("Universal Metering") which is in the business of
selling water meter installation, reading and maintenance services to
residential and commercial properties. The Company and Universal Metering are
parties to a letter of intent pursuant to which the Company and Universal
Metering would enter into an agreement under which the Company would lease
certain water meter equipment to the owners or operators of such properties. In
addition, PLM owns substantially all of a business that owns and operates an
independent grocery store located in the Seattle area which leases certain
equipment from the Company. Michael A. Price and Thomas W. Price also own a
significant part of a consulting and financial services business which leases
certain computer equipment from the Company. See "Certain Transactions -- P.L.M.
Consulting Group L.L.C." and "-- Officers and Directors."

As a result of the Restructuring, T&W Financial Corporation will own 85% of
the membership interests of T&W Financial Services L.L.C. (the "LLC") and
Funding Company VI will own the remaining 15% of the membership interests of the
LLC. Profits and losses of the LLC will be allocated to T&W Financial
Corporation and Funding Company VI in accordance with their respective ownership
of the LLC; however, 99% of the deductions or losses associated with secured
lines of credit or other recourse liabilities of the LLC will be allocated to
Funding Company VI, whose principals will guarantee such liabilities. See "The
Restructuring" and "Certain Transactions -- T&W Funding Company VI, LLC."

Such arrangements and agreements have not been negotiated on an arm's
length basis and may not represent the terms that would have been negotiated
with unaffiliated third parties. In addition, such relationships may give rise
to potential conflicts of interest between the Company and certain of its
directors and officers. Pursuant to policies adopted by the Company's Board of
Directors, any contract or other transaction entered into by the Company with
respect to which one or more of its directors or officers has a material
financial interest, or between the Company and any business in which one or more
of its directors or officers has a material financial interest, must be approved
by a majority of the disinterested directors of the Company with respect to such
transaction. In addition, if a business opportunity arises through one of the
Company's affiliates, such as Funding Company VI or PLM, which the Company could
reasonably have an interest in pursuing, such opportunity will be offered first
to the Company. There can be no assurance that such policies will always be
successful in eliminating or reducing the influence of potential conflicts of
interest. Notwithstanding such policies, decisions could be made that fail to
reflect fully the interests of all shareholders of the Company.

RESIDUAL VALUE RISK

The Company retains a residual interest in the equipment covered by
substantially all of its leases. The residual interest is equal to the estimated
fair market value of the equipment at the end of the contract term of the lease
and is reflected as an asset on the Company's balance sheet. The Company's
results of operations depend, to some degree, upon its ability to realize these
residual values. Realization of residual values depends on many factors that are
outside the Company's control, including general market conditions at the time
of expiration of the lease, any unusual wear and tear on, or use of, the
equipment, the cost of comparable new equipment, the extent, if any, to which
the equipment has become technologically or economically obsolete during the
contract term and the effects of any additional or amended government
regulations. Generally, the

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Company requires the lessee and its owners to guarantee that the Company will
receive a specified amount of proceeds upon sale of the underlying equipment at
the end of the lease term. If, upon the expiration of a lease, the Company sells
or refinances the underlying equipment and the amount realized is less than the
recorded residual value of such equipment, a loss reflecting the difference will
be recognized unless the deficiency is recovered from the lessee. However, no
assurance can be given that the Company will be able to recover any deficiency
under such guarantees. Any failure by the Company to realize aggregate recorded
residual values could have a material adverse effect on its financial condition,
results of operations and prospects. See "Business -- Terms of Equipment
Leases."

ACQUISITION RISKS

One of the components of the Company's growth strategy is the selected
acquisition of other equipment leasing companies. The inability of the Company
to identify suitable acquisition candidates or to complete acquisitions on
reasonable terms could adversely affect the Company's ability to grow its
business. In addition, any acquisition made by the Company may result in
potentially dilutive issuances of equity securities, the incurrence of
additional debt and the amortization of expenses related to goodwill and other
intangible assets. The Company also may experience difficulties in the
assimilation of the operations, services, products and personnel of acquired
companies, an inability to sustain or improve the historical revenue levels of
acquired companies, the diversion of management's attention from ongoing
business operations and the potential loss of key employees of such acquired
companies. Any of the foregoing could have a material adverse effect on the
Company's financial condition, results of operations and prospects. The Company
currently has no agreements with regard to potential acquisitions and there can
be no assurance that future acquisitions will be consummated. See
"Business -- Recent Acquisition."

GENERAL ECONOMIC RISKS

The Company's business could be affected by general economic conditions in
the United States, and any sustained period of economic slowdown or recession
could materially adversely affect the Company's financial condition, results of
operations and prospects. The risks to which the Company's business is subject
may become more acute during an economic slowdown or recession because the
ability of lessees to make lease payments or honor guarantees may be impaired,
resulting in increased credit losses. In addition to reducing or eliminating
spreads and potentially requiring a writedown of the Company's securitization
receivable, increased credit losses may impair the Company's access to the
securitization and bank financing markets. Reduced levels of demand for
equipment in a slowdown or recession may also result in reduced lease
originations by the Company.

VARIABLE QUARTERLY RESULTS

The Company's quarterly operating results have fluctuated in the past, and
are expected to continue to fluctuate in the future, principally as a result of
the timing and size of its securitizations, the interest rate on the securities
issued in its securitizations, seasonal or other variations in the size or
volume of leases originated by the Company, the spread between the effective
interest charged by the Company under its leases and the interest paid by the
Company under its bank lines of credit and securitizations, the effectiveness of
the Company's hedging strategies, the degree of competition in the "small
ticket" equipment leasing market and general economic conditions. Accordingly,
the Company's operating results for any one quarter or combination of quarters
should not be relied upon as being indicative of the Company's operating results
for future periods.

COMPETITION

The "small ticket" equipment leasing market is highly competitive. The
Company competes with a number of national, regional and local finance
companies, Equipment Providers that provide financing for the sale or lease of
equipment themselves and traditional financial services companies, such as
commercial banks and savings and loan associations, many of which possess
substantially greater financial, marketing and operational resources than the
Company. In addition, the Company's competitors and potential competitors

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<PAGE> 15

include many larger, more established companies that may have a lower cost of
funds than the Company and access to capital markets and to other funding
sources that may be unavailable to the Company.

RELATIONSHIPS WITH EQUIPMENT PROVIDERS

The Company relies to a significant degree upon its established business
relationships with Equipment Providers as a source of new lease originations.
The Company does not have formal agreements with any Equipment Providers and no
assurance can be given that such relationships will continue. The discontinuance
of the relationship with one or more Equipment Providers could reduce the volume
of new leases that the Company is able to originate, which could have a material
adverse effect on the Company's financial condition, results of operations and
prospects. See "Business -- Marketing."

The Company is also subject to certain inherent business risks. For
example, although the Company does not warrant the condition or performance of
equipment that it leases and is not responsible for the servicing or repair of
such equipment, the bankruptcy or other failure of one or more Equipment
Providers to replace, service or repair leased equipment could adversely impact
the ability of the Company to collect payments from lessees. In addition,
because the Company retains title to equipment that it leases, the Company could
be subject to product defect, environmental or other claims for injuries or
violations of law arising out of a lessee's use of such equipment. Although the
terms of the Company's lease contracts require the lessee to indemnify the
Company for any claims arising out of the lessee's use of leased equipment,
there can be no assurance that the Company would be able to recover such amounts
from the lessee.

GEOGRAPHIC AND INDUSTRY CONCENTRATION RISKS

Although the Company originates leases throughout the United States, at
June 30, 1997, approximately 52% of its portfolio of leases serviced was located
in the states of Washington (34%), California, Texas and New York. Accordingly,
adverse economic conditions or other factors particularly affecting these states
could have a material adverse effect on the Company's financial condition,
results of operations and prospects. In addition, a significant portion of the
Company's portfolio of leases serviced is concentrated in specific industries,
including fast food franchises (12.2%), independent grocery stores (10.6%),
funeral homes, hospitality, liquid waste disposal and horticulture. Adverse
changes in economics, regulatory or competitive conditions prevalent in such
industries could have a material adverse effect on the Company's financial
condition, results of operations and prospects. See "Business -- Growth
Strategy" and "-- Marketing."

RISKS ASSOCIATED WITH NEW PRODUCT OFFERINGS

The Company may in the future provide products not previously offered by it
to lessees, or offered only on a limited basis, such as financing in the form of
construction or commercial loans secured by real property or joint ventures
between the Company and Equipment Providers to purchase and lease equipment. The
Company has either very limited or no experience with these new products and
programs, and there can be no assurance that the Company will be able to market
such products and programs successfully or that the return on such products and
programs will be consistent with the Company's historical financial results.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a large extent upon the experience and
continuing contributions of Michael A. Price, Chairman of the Board and Chief
Executive Officer; Thomas W. Price, President; Paul B. Luke, Senior Vice
President, Chief Financial Officer, Secretary and Treasurer; and Kenneth W.
McCarthy, Jr., Senior Vice President and General Counsel. See
"Management -- Directors and Executive Officers." The loss of the services of
any one of these individuals could have a material adverse effect on the
Company's financial condition, results of operations and prospects. The
Company's future success also depends on its ability to identify, attract and
retain additional qualified personnel. There can be no assurance that the
Company will be successful in identifying, attracting and retaining such
personnel.

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DEPENDENCE ON RELATIONSHIP WITH PLM

The Company's success depends to a large extent upon its relationship with
PLM. The Company has entered into an agreement with PLM pursuant to which PLM
will provide the Company with the services of Michael A. Price, Thomas W. Price,
Paul B. Luke and Kenneth W. McCarthy, Jr. to act as executive officers of the
Company. Such individuals will devote substantially all of their time to the
affairs of the Company. See "Certain Transactions -- P.L.M. Consulting Group,
L.L.C." The loss of the relationship with PLM could have a material adverse
effect on the Company's financial condition, results of operations and
prospects.

CONTROL OF THE COMPANY BY EXISTING SHAREHOLDERS

Following the closing of the Offering, Michael A. Price will be the
beneficial owner of an aggregate of approximately 59.36% of the outstanding
shares of Common Stock. This concentration of ownership will effectively give
Michael A. Price voting control with respect to all material matters requiring
approval by the shareholders of the Company, including, among other things, the
election or removal of the entire Board of Directors, any increase of the
authorized capital stock of the Company and the dissolution, merger or sale of
all or substantially all of the assets of the Company. Neither the Company's
Articles of Incorporation (the "Articles") nor applicable Washington corporate
law requires cumulative voting for directors. See "Principal and Selling
Shareholders" and "Description of Capital Stock."

ANTITAKEOVER PROVISIONS

Certain provisions of Washington law and the Articles and Bylaws (the
"Bylaws") of the Company may make it more difficult or expensive for a third
party to acquire, or discourage a third party from attempting to acquire,
control of the Company. In particular, the Board of Directors of the Company has
the power to issue "blank check" preferred stock (the "Preferred Stock") with
rights senior to the Common Stock without approval by the shareholders of the
Company. The Preferred Stock may be issued from time to time with such
designations, rights, preferences and privileges as the Board of Directors may
determine and may adversely affect the rights of the Common Stock. In addition,
the Board of Directors, at the direction of the principal shareholders, may at
any time adopt a shareholders rights plan or "poison pill" that may make it more
difficult or expensive for the Company to be acquired by a third party. See
"Description of Capital Stock -- Antitakeover Restrictions."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 8,000,000 shares of
Common Stock outstanding. The 2,560,000 shares of Common Stock offered hereby
will be freely tradable without restriction or further registration under the
Securities Act, except for shares purchased by persons deemed to be "affiliates"
of the Company or acting as "underwriters," as these terms are defined in the
Securities Act. The remaining 5,440,000 shares of Common Stock will be
"restricted securities" as the term is defined in Rule 144 under the Securities
Act (the "Restricted Securities"). The Company, its executive officers and
directors, and certain shareholders of the Company have agreed not to sell,
offer to sell, contract to sell, pledge or otherwise dispose of or transfer,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for, or any rights to purchase or acquire,
shares of Common Stock for a period of 180 days commencing on the date of this
Prospectus without the prior written consent of Oppenheimer & Co., Inc., other
than the sale of the shares of Common Stock in the Offering and the issuance by
the Company of: (i) options to purchase shares of Common Stock (and shares of
Common Stock issuable upon the exercise of such options) in connection with the
1997 Stock Option Plan; (ii) shares of Common Stock in connection with the 1997
Employee Stock Purchase Plan; (iii) shares of Common Stock in connection with
the 1997 Director Stock Grant Plan; and (iv) 13,700 shares of Common Stock to be
awarded to certain employees of the Company. See "Shares Eligible for Future
Sale."

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ABSENCE OF PUBLIC TRADING MARKET; POSSIBLE FLUCTUATIONS IN STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that any active public trading market for the
Common Stock will develop, or that if developed, it will be sustained after the
Offering, or that the purchasers of shares of the Common Stock will be able to
resell their shares at prices equal to or greater than the initial public
offering price. The initial public offering price will be determined by
negotiations between the Company and the representatives of the Underwriters,
and may not be indicative of the market price for the Common Stock in the
future. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.

The market price of the Common Stock may experience fluctuations that are
unrelated to the operating performance of the Company. In particular, the price
of the Common Stock may be affected by general market price movements as well as
developments specifically related to the equipment leasing industry including,
but not limited to, interest rate changes and delinquency trends. Numerous
factors including, but not limited to, announcements of new leasing products,
services or programs by the Company or its competitors, economic or other
external factors and fluctuations in financial or operating results or prospects
of the Company or its competitors may have a significant impact on the market
price and marketability of the Common Stock.

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the book
value per outstanding share of the Common Stock. Accordingly, purchasers in this
Offering will experience immediate and substantial dilution in net tangible book
value of $10.52 per share ($10.09 per share if the Underwriters' over-allotment
option is exercised in full). See "Dilution."

ABSENCE OF DIVIDENDS

Following the completion of the Offering, the Company intends to retain
earnings to finance the growth and development of its business. Accordingly, the
Company does not anticipate paying cash dividends on the Common Stock in the
foreseeable future. In addition, provisions in certain of the Company's lines of
credit may require that the Company maintain certain financial ratios and net
worth, which may restrict the Company's ability to pay dividends. See "Dividend
Policy."

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THE RESTRUCTURING

The Company operates through corporations that are treated for federal and
state income tax purposes as small business corporations under Subchapter S of
the Internal Revenue Code of 1986, as amended, and limited liability companies.
See Note 1 to T&W Financial Corporation and Affiliates Financial Statements.
Such entities were formed primarily to serve as special purpose entities for the
completion of securitizations, bank financings and related transactions, and are
pass-through entities for income tax purposes, with each shareholder or member
taxed individually on their proportionate share of the relevant entity's income.
The beneficial owners of such entities are Michael A. Price, Thomas W. Price,
Paul B. Luke and Kenneth W. McCarthy, Jr.

T&W Financial Corporation, a Washington corporation incorporated in August
1997, and T&W Financial Services Company L.L.C., a Washington limited liability
company formed in August 1997 (the "LLC"), have been organized for the purpose
of succeeding to the business of the Company. In connection with the Offering,
substantially all of the assets and liabilities of the pass-through entities
will be effectively transferred to and assumed by the LLC, and all of the
employees of such entities (excluding the executive officers of the Company)
will become employees of the LLC (the "Restructuring"). As a result of the
Restructuring, T&W Financial Corporation will become the manager of, and will
own an 85% membership interest in, the LLC. T&W Funding Company VI, LLC
("Funding Company VI"), which is owned 50% by Michael A. Price and Thomas W.
Price and 50% by P.L.M. Consulting Group, L.L.C. ("PLM"), will own the remaining
15% membership interest in the LLC. The members of PLM are Michael A. Price,
Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. See "Certain
Transactions -- T&W Funding Company VI, LLC" and "-- P.L.M. Consulting Group,
L.L.C."

Following the Restructuring, the LLC will conduct all of the Company's
leasing operations and business. Profits and losses of the LLC will be allocated
to T&W Financial Corporation and Funding Company VI in accordance with their
respective ownership of the LLC; however 99% of the deductions or losses
associated with secured lines of credit or other recourse liabilities of the LLC
will be allocated to Funding Company VI, whose principals will guarantee such
liabilities. See "Certain Transactions -- T&W Funding Company VI, LLC."
References to the "Company" in this Prospectus reflect the combined assets and
operations of the T&W Financial Corporation as a result of its 85% membership
interest in the LLC. See "Risk Factors -- Potential Conflicts of Interest
Between the Company and Certain Affiliates."

The following illustrates the Company's organization after the
Restructuring:

[ILLUSTRATION]
17
<PAGE> 19

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company hereby are estimated to be $29,990,000
($35,346,800 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $15.00 per share (the mid-point of
the price range set forth on the cover page of this Prospectus), after deducting
the underwriting discount and estimated offering expenses.

The Company intends to use the net proceeds for the repayment of certain
lines of credit and for general corporate purposes, including working capital to
fund the expansion of its leasing business. Approximately $11.4 million of the
net proceeds will be used to repay a portion of the outstanding balance under
the Company's bank lines of credit. The Company's existing lines of credit bear
interest at variable rates varying from 30-day LIBOR plus 1.75%, LIBOR plus 2%
and the annual Eurodollar rate. Approximately $1.6 million of the net proceeds
will be used to repay the balance under the Company's credit arrangement with
PLM, which bears interest at 2.0% above the 30-day LIBOR. See "Certain
Transactions -- P.L.M. Consulting Group, L.L.C." Amounts borrowed under the
lines of credit and the credit arrangement are used to fund the acquisition and
origination of leases. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Bank
Lines of Credit."

In the ordinary course of business, the Company expects to evaluate
potential acquisitions of other equipment leasing businesses. The Company may,
if the opportunity arises, use an unspecified portion of the net proceeds to
acquire or invest in complementary businesses. However, the Company has no
present understandings, commitments or agreements with respect to any material
acquisition or investment. Pending use of the net proceeds for the above
purposes, the Company intends to invest such funds in short-term,
interest-bearing, investment-grade securities.

The Selling Shareholders intend to use substantially all of their proceeds
to repay certain obligations to the Company, including the balance of certain
remaining lease payments and all of the unpaid interest and principal under
certain promissory notes. See "Certain Transactions -- Certain Relationships
Terminating at Closing."

DIVIDEND POLICY

The Company currently intends to retain earnings to finance the growth and
development of its business and does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. In addition, provisions in certain
of the Company's bank lines of credit may require that the Company maintain
certain financial ratios and net worth, which may restrict the Company's ability
to pay dividends. Any future change in the Company's dividend policy will be
made at the discretion of the Company's Board of Directors in light of the
financial condition, capital requirements, earnings and prospects of the Company
and any restrictions under the Company's credit agreements, as well as other
factors the Board of Directors may determine to be relevant. Except for S
corporation and limited liability company distributions, the Company has not
declared or paid any dividends since its inception. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Bank Lines of Credit."

18
<PAGE> 20

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1997, (i) on an actual basis, (ii) on a pro forma basis to give effect to
the Restructuring and (iii) on a pro forma as adjusted basis to give further
effect to the Offering and the application of the estimated net proceeds
therefrom and the payment of notes in connection with the exercise of the
options held by Kenneth W. McCarthy, Jr. and Paul B. Luke. The table should be
read in conjunction with "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the T&W
Financial Corporation and Affiliates Financial Statements and related notes
thereto.

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Notes payable:
Recourse.............................................. $17,659 $17,659 $4,659
Non-recourse.......................................... 80,804 80,804 80,804
-------- -------- --------
Total notes payable........................... 98,463 98,463 85,463
-------- -------- --------
Minority interest....................................... -- 1,825 1,825
-------- -------- --------
Shareholders' equity:
Preferred Stock, par value $0.01 per share, 10,000,000
shares authorized; no shares issued and
outstanding........................................ -- -- --
Common Stock and paid in capital, par value $0.01 per
share, 40,000,000 shares authorized; 5,800,000
shares issued and outstanding on a pro forma basis;
8,000,000 shares issued and outstanding on a pro
forma as adjusted basis(1)(2)...................... 3,438 3,438 34,590(3)
Retained earnings..................................... 8,726 3,401 3,401
-------- -------- --------
Total shareholders' equity.................... 12,164 6,839 37,991
-------- -------- --------
Total capitalization.......................... $110,627 $ 107,127 $125,279
======== ======== ========
</TABLE>

- ---------------

(1) Excludes 1,000,000 shares of Common Stock reserved for issuance upon
exercise of options under the Company's 1997 Stock Option Plan; 100,000
shares of Common Stock reserved for issuance under the Company's 1997
Employee Stock Purchase Plan; 10,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1997 Director Stock Grant Plan; and
13,700 shares of Common Stock to be awarded to employees of the Company
following the Offering. No options or shares of Common Stock are currently
outstanding under such plans but the Company has the obligation to grant
options at the initial public offering price for 22,000 shares of Common
Stock to each of James R. Neese and Larry E. Rice as a result of the
Commercial Capital acquisition. See "Business -- Recent Acquisition" and
"Management -- Benefit Plans."

(2) Includes the exercise of outstanding and fully vested stock options in July
1997 by certain members of the Company's senior management in exchange for
promissory notes. See "Management -- Executive Compensation."

(3) Includes repayment by members of the Company's senior management of an
aggregate of $1,162,158 under promissory notes issued in exchange for the
stock options exercised in July 1997. See "Certain Transactions -- Certain
Relationships Terminating at Closing."

19
<PAGE> 21

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1997
(after giving effect to the Restructuring) was approximately $4.6 million or
$0.80 per share of Common Stock. Pro forma net tangible book value per share
represents the amount of the Company's pro forma shareholders' equity of
approximately $6.8 million, less intangible assets of $2.2 million, divided by
the 5,800,000 pro forma shares of Common Stock outstanding after the
Restructuring.

Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of shares of Common Stock in the Offering
and the pro forma net tangible book value per share of Common Stock offered
hereby immediately after completion of the Offering. After giving effect to the
sale of the Common Stock at an estimated initial public offering price of $15.00
per share (the mid-point of the price range set forth on the cover page of this
Prospectus) and after deduction of the underwriting discount and estimated
expenses of the Offering, the as adjusted pro forma net tangible book value, as
of June 30, 1997, would have been approximately $35.8 million or $4.48 per share
of Common Stock. This represents an immediate increase in pro forma net tangible
book value of $3.68 per share to existing shareholders and an immediate dilution
of $10.52 per share to new investors purchasing the Common Stock, as illustrated
in the following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock............. $15.00
Pro forma net tangible book value per share as of June 30, 1997 (1)....... $0.80
Increase per share in pro forma net tangible book value attributable to
new investors.......................................................... 3.68
-----
Pro forma net tangible book value per share after the Offering (1)(2)....... 4.48
------
Pro forma net tangible book value dilution per share to new investors(2).... $10.52
======
</TABLE>

- ---------------

(1) On a pro forma basis to give effect to the Restructuring.

(2) If the Underwriters exercise their over-allotment option in full, the pro
forma net tangible book value per share after the Offering would be $4.91
and dilution of pro forma net tangible book value per share to new investors
would be $10.09.

The following table sets forth, after giving effect to the Offering, the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing shareholders
and by new investors (at the assumed initial public offering price of $15.00 per
share):

<TABLE>
<CAPTION>
SHARES OWNED
AFTER THE OFFERING TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders(1)............ 5,800,000 72.5% $3,438,000 9.4% $0.59
New Investors(1).................... 2,200,000 27.5% 33,000,000 90.6% 15.00
--------- ----- ----------- ------
Total..................... 8,000,000 100.0% $36,438,000 100.0%
========= ===== =========== ======
</TABLE>

- ---------------

(1) Sales by Selling Shareholders in the Offering will reduce the number of
shares held by existing shareholders to 5,440,000 or 68.0% (or 64.9% if the
Underwriters exercise their over-allotment option in full) and will increase
the number of shares held by new investors to 2,560,000 or 32.0% (or 35.1%
if the Underwriters exercise their over-allotment option in full) of the
total number of shares of Common Stock outstanding after the Offering. See
"Principal and Selling Shareholders" and "Underwriting."

20
<PAGE> 22

SELECTED COMBINED FINANCIAL AND OPERATING DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected data presented below under the captions "Income Statement
Data" and "Balance Sheet Data" for and as of each of the five years ended
December 31, 1996 are derived from the combined financial statements of the
Company and certain affiliates, which financial statements have been audited by
BDO Seidman, LLP, independent certified public accountants. Such combined
financial statements as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996, and the independent certified
public accountants' report thereon, are included elsewhere in this Prospectus.
The selected combined financial data presented below at June 30, 1997, and for
the six months ended June 30, 1996 and 1997 are derived from the Company's
unaudited combined financial statements for such periods, which also are
included in this Prospectus. In the opinion of management, such unaudited
combined interim financial statements have been prepared on a basis consistent
with that utilized in preparation of the annual audited financial statements and
include all adjustments, consisting of normal recurring adjustments necessary
for a fair presentation of the information set forth therein. Results for the
six-month period ended June 30, 1997, are not necessarily indicative of the
results that may be expected by the Company for the complete fiscal year. The
pro forma financial information presented below gives effect to the
Restructuring as if it had occurred as of June 30, 1997 for balance sheet data,
and as of the beginning of the indicated periods for income statement data,
respectively. The data set forth below should be read in conjunction with the
Company's combined financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997(1)
------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lease contract revenue.................. $3,162 $4,286 $7,132 $10,621 $16,834 $6,944 $7,298
Gain on sale of leases.................. -- -- -- -- -- -- 3,448(2)
Fee income.............................. 976 567 607 1,364 2,067 1,099 134
Servicing and other income.............. 344 256 292 555 595 517 738
------ ------ ------ ------- ------- ------ -------
Total revenues.................. 4,482 5,109 8,031 12,540 19,496 8,560 11,618
------ ------ ------ ------- ------- ------ -------
Expenses:
Interest expense........................ 1,490 1,577 2,589 4,513 6,434 2,911 3,726
Compensation and related expenses....... 814 948 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct costs.... 337 640 848 1,302 1,893 854 1,222
Provision for credit losses............. 107 172 223 621 1,137 345 402
Other general and administrative
expenses............................. 507 627 601 807 1,345 757 1,073
------ ------ ------ ------- ------- ------ -------
Total expenses.................. 3,255 3,964 5,745 9,039 13,668 6,172 8,409
------ ------ ------ ------- ------- ------ -------
Net income................................ $1,227 $1,145 $2,286 $3,501 $5,828 $2,388 $3,209
====== ====== ====== ======= ======= ====== =======
PRO FORMA AMOUNTS(3):
Income before minority interest and
income taxes......................... $5,828 $3,209
Minority interest....................... (874) (481)
------- -------
Income before income taxes.............. 4,954 2,728
Provision for income taxes.............. (1,783) (982)
------- -------
Net income.............................. $3,171 $1,746
======= =======
Net income per share................. $0.55 $0.30
Weighted average number of shares of
Common Stock and Common Stock
equivalent shares outstanding........ 5,800 5,800
</TABLE>

- ---------------

(1) Includes operating results relating to Commercial Capital for the period
since its acquisition on June 2, 1997. See "Business -- Recent Acquisition."

21
<PAGE> 23

<TABLE>
<CAPTION>
JUNE 30, 1997(1)
DECEMBER 31, -------------------
------------------------------------------------ PRO
1992 1993 1994 1995 1996 ACTUAL FORMA(2)
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $1,056 $2,429 $4,145 $4,323 $8,064 $8,861 $8,861
Net investment in leases............. 19,772 34,528 56,060 90,359 135,087 103,890 103,890
Total assets......................... 21,074 37,311 61,242 96,051 144,437 124,180 124,180
Notes payable -- recourse............ 6,537 14,885 11,481 8,833 32,272 17,659 17,659
Notes payable -- non-recourse........ 9,013 14,253 36,014 67,686 89,975 80,804 80,804
Total liabilities.................... 17,362 32,218 53,775 86,501 134,140 112,016 115,516
Shareholders' equity................. 3,712 5,093 7,467 9,550 10,297 12,164
Pro forma deferred income tax
liability.......................... 3,500
Pro forma minority interest.......... 1,825
Pro forma shareholders' equity....... 6,839
</TABLE>

<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Lease financing receivables
originated:
Number of contracts............. 711 993 1,488 1,370 3,630 2,609 1,257
Lease originations(3)........... $9,833 $21,703 $34,290 $55,348 $80,638 $31,370 $49,245
Leases serviced
Number of contracts............. 1,610 2,554 3,517 4,086 6,983 6,349 7,255
Portfolio of leases
serviced(4)................... $21,649 $38,436 $61,797 $97,772 $148,086 $119,156 $174,729
Average portfolio yield(5)...... 19.8% 16.3% 16.1% 14.7% 15.2% 14.2% 12.7%(6)
Credit quality statistics:
Delinquencies as a percentage of
portfolio or leases serviced
31-60 days...................... 4.40% 2.50% 2.52% 1.50% 2.89% 2.48% 1.19%
61-90 days...................... 1.40% 0.31% 0.42% 0.86% 1.38% 0.71% 1.24%
91-120 days..................... 0.47% 0.10% 0.15% 0.78% 0.32% 0.63% 0.98%
Over 120 days................... -- 0.99% 0.90% -- 1.04% 0.60% 0.96%
------- ------- ------- ------- -------- -------- --------
Total...................... 6.27% 3.90% 3.99% 3.14% 5.63% 4.42% 4.37%
Net charge-offs(7)................. 0.36% 0.09% 0.02% 0.39% 0.64% 0.09% 0.27%
</TABLE>

- ---------------

(1) Includes assets and liabilities of Commercial Capital.

(2) Pro forma balance sheet data reflects adjustments to historical amounts for
(a) the inclusion of a 15% minority interest in the LLC in connection with
the Restructuring at June 30, 1997, and (b) estimated deferred income taxes
as if the Company had been treated as a taxable entity rather than an
affiliated group of pass-through entities. See "The Restructuring" and Notes
to the T&W Financial Corporation and Affiliates Financial Statements.

(3) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.

(4) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.

(5) Represents the average yield recognized during the period for the portfolio
of leases serviced.

(7) Represents charge-offs (reduced by recoveries), divided by their respective
period's average minimum lease payments, including residuals, under all
leases serviced in the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.

22
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements are made throughout this Management's Discussion
and Analysis of Financial Condition and Results of Operations. Any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements,
including those detailed in this section and in "Risk Factors." In addition,
this section should be read in light of the effects of the Restructuring. See
"The Restructuring."

OVERVIEW

The leases that the Company originates are "direct financing" leases in
that they transfer substantially all of the benefits and risks of equipment
ownership to the lessee. A lease is classified as a direct financing lease for
accounting purposes if the collection of the minimum lease payments is
reasonably predictable, no significant uncertainties exist relating to
non-reimbursable costs yet to be incurred by the lessor under the lease and the
lease meets one of the following criteria: (i) ownership of the property is
transferred to the lessee at the end of the lease term; (ii) the lease contains
a bargain purchase option; (iii) the term of the lease is at least equal to 75%
of the estimated economic life of the leased equipment; or (iv) the present
value of the minimum lease payments is at least equal to 90% of the fair value
of the leased equipment at the inception of the lease. Since the Company's
leases are classified as direct financing leases, the Company records total
lease rentals, estimated residual values and initial direct costs as the gross
investment in the lease. The difference between the gross investment in the
lease and the cost of the leased equipment (including initial direct costs) is
recorded as "unearned income." Lease contract income is recognized over the term
of the lease by amortizing the unearned income using the interest method. For
income tax purposes, the Company treats its leases as "true" leases or operating
leases which, through depreciation deductions related to the leased equipment,
generate tax benefits for the Company and its affiliates. See "The
Restructuring" and "Certain Transactions."

The Company finances a majority of its lease originations utilizing
securitizations. The Company has utilized several structures in its
securitizations. Prior to 1997, the Company structured such securitizations as
financings for financial reporting purposes. Beginning in 1997, the Company has
structured such securitizations as sales for financial reporting purposes in
accordance with the new accounting standard for the transfer of financial
assets, SFAS No. 125. The Company's current lease securitization structure is a
commercial paper based conduit facility in which the Company contributes its
leases (including related residuals) to a special purpose limited liability
entity. Such entity sells the leases to an owner trust and the owner trust then
sells certificates backed by the leases to an unaffiliated special purpose
corporate entity which administers a multi-seller commercial paper conduit.

The change in structure of the Company's securitizations from financings to
sales has had, and will continue to have, a significant effect on the Company's
balance sheet and income statement. Under financing treatment the Company
recorded its net investment in leases as assets and the funds raised from
securitizations as non-recourse notes payable on its balance sheet. Under sale
treatment the only item to appear on the balance sheet is an asset, the
securitization receivable. The existing balance of net investment in leases and
non-recourse notes payable should decline over time as the related leases are
paid down. Under financing treatment the Company records lease contract revenue
and interest expense on the non-recourse debt. Initial direct costs associated
with the origination of leases are amortized as an expense over the life of the
leases and provisions for credit losses are recorded based upon loss experience.
Under sale treatment the Company records a gain on sale of leases. Initial
direct costs associated with the origination of the leases sold are expensed at
the time of the sale and reduce the reported gain on sale. As a result of
structuring its securitizations as sales, the Company's lease contract revenue
and interest expense on the non-recourse notes payable will decline over time.

23
<PAGE> 25

The Company sells each pool of leases for a price equal to the present
value of future cash flows, including guaranteed residuals. Upon sale, the
Company receives in cash a substantial portion of the present value of future
cash flows, with the remaining balance held as collateral by the owner trust.
Any such amount is included on the Company's balance sheet as the securitization
receivable. Recourse to the Company in such sales is limited to the extent of
the securitization receivable with respect to the leases sold. The Company
retains the servicing rights and responsibilities for each pool of leases sold
and receives as compensation normal servicing fees over the life of such leases.

The Company recognizes gain on the sale of leases at each sale date based
on a determination of the present value of the estimated future amounts to be
realized by the Company in connection with such sale. These estimates consider
all cash flows generated by the leases sold over their life less: (i) trustee
and other transaction related fees; (ii) credit enhancement expenses, if any
(such as the monoline insurers' fee, if the leases are wrapped as in the most
recent securitizations); (iii) normal servicing fees, which are retained by the
Company in its capacity as servicer and are recognized over the life of the
transaction; and (iv) payments to purchasers under the certificates. The
securitization receivable is reduced by an allowance which is estimated by the
Company to be adequate to cover future credit losses. No allowance is made for
estimated prepayments, which historically have been insignificant due to the
non-cancelable nature of the leases.

The Company evaluates the carrying value of securitization receivable for
each sale transaction at the end of each reporting period in light of actual
credit loss experience of the underlying leases sold and would make adjustments
to charge or credit operating results accordingly. To date, the Company has not
recorded any such adjustments. The Company believes that there is no active
market for the sale of its securitization receivable. See "Risk
Factors -- Dependence on Securitizations."

The Company intends to continue to sell a substantial portion of its leases
which it originates, using the most recent securitization structure or similar
securitization structures. There can be no assurance, however, that the Company
will be able to sell its future leases, or that the terms of any such sales will
be as favorable or similar to the terms of the Company's current sale
transactions. See "Risk Factors -- Dependence on Securitizations."

Due to the recognition of earnings from the gain resulting from the sale of
the Company's leases, the Company's reported earnings during a particular period
will be impacted by the amount and timing of sales which the Company may
consummate in such future period. Variations in quarterly earnings will depend
on the amount and timing of the completion of such sales. See "Risk
Factors -- Dependence on Securitizations" and "Risk Factors -- Variable
Quarterly Results."

RESULTS OF OPERATIONS

The Company's revenues comprise lease contract revenue, gain on sale of
leases, fee income, and servicing and other income. Lease contract revenue is
the revenue recognized from the net investment in leases held. Gain on sale of
leases is the revenue recognized under sale treatment for leases securitized.
Fee income represents security deposits which are recognized as income upon
lease expirations and commitment fees received upon the origination of leases.
Servicing and other income includes normal servicing fees, late fees, interest
income and amounts received from the owner trust relating to interest rate
collar agreements.

The Company's expenses comprise interest expense, compensation and related
expenses, amortization of initial direct costs, provisions for credit losses and
other general and administrative expenses. Interest expense includes the expense
related to notes payable and the amortization of related debt issuance costs.
Compensation and related expenses include salaries and bonuses paid to employees
and management fees to affiliates. Amortization of initial direct costs relates
to costs associated with originating leases, including commissions, which are
amortized over the period of the leases. Provisions for credit losses are
provided based on estimated future credit losses. Other general and
administrative expenses include trustee, legal and other professional fees, and
occupancy and other office-related expenses.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30,
1996. Leases originated increased from $31.4 million for the six months ended
June 30, 1996 to $49.2 million for the comparable

24
<PAGE> 26

period in 1997, representing an increase of 57.0%. The number of leases
originated decreased from 2,609 for the six months ended June 30, 1996 to 1,257
for the comparable period in 1997. This increase in dollar volume and the
decrease in the number of leases originated was due to an increase in the
average ticket size in 1997 over the 1996 period. During the six months ended
June 30, 1996, the Company originated a relatively high volume of leases having
a small average ticket size to businesses in the funeral home industry. The
average annualized yield of the portfolio of leases serviced decreased from
14.2% for the six months ended June 30, 1996 to 12.7% for the comparable period
in 1997. This decrease in yield resulted primarily from (i) the reduction in the
average estimated residual income inherent in lease contracts originated in 1997
and (ii) the impact of the Company's continuing focus on relatively larger lease
transactions involving lessees with relatively stronger credit (and hence lower
implicit interest rates) including high volume equipment provider programs.

The portfolio of leases serviced increased from $119.2 million at June 30,
1996 to $174.7 million at June 30, 1997, representing an increase of 46.6%. This
increase was due to an increase in lease originations.

Lease contract revenue increased from $6.9 million for the six months ended
June 30, 1996 to $7.3 million for the comparable period in 1997, representing an
increase of 5.1%, due primarily to an increased average net investment in leases
owned during the 1997 period.

As described above, in 1997, the Company's securitizations have
predominantly been structured as sales for financial reporting purposes, rather
than as financing transactions as was the case in prior years. During the six
months ended June 30, 1997, the Company recognized a gain on sale of $3.4
million. Since the Company plans to continue to structure its securitizations as
sale transactions, it anticipates that gain on sale of leases will increase and
become a larger portion of revenues in the future.

Fee income decreased from $1.1 million for the six months ended June 30,
1996 to $134,000 for the comparable period in 1997, representing a decrease of
87.8%. This decrease was due primarily to the decline of security deposits
recognized as income upon lease expiration. Commencing in late 1996, the Company
began to credit security deposits to customers at lease expiration rather than
retaining and recognizing such deposits as income.

Servicing and other income increased from $517,000 for the six months ended
June 30, 1996 to $738,000 for the comparable period in 1997, representing an
increase of 42.7%, due primarily to income received from the owner trust
principally related to interest rate collar agreements during 1997.

Total revenues increased from $8.6 million for the six months ended June
30, 1996 to $11.6 million for the comparable period in 1997, representing an
increase of 35.7%.

Interest expense increased from $2.9 million for the six months ended June
30, 1996 to $3.7 million for the comparable period in 1997, representing an
increase of 28.0%. The increase was due to increased average borrowings
outstanding during the 1997 period as compared to the prior year as well as
increased interest rates in 1997 due to the fixing of interest rates associated
with a substantial portion of the borrowings in 1997.

Compensation and related expenses increased from $1.3 million for the six
months ended June 30, 1996 to $2.0 million for the comparable period in 1997,
representing an increase of 52.2%. The increase was due primarily to management
fees of $600,000 paid to PLM during the six months ended June 30, 1997, pursuant
to a management services arrangement which commenced in July 1996, and increases
in the number of employees and compensation levels necessitated by the growth of
the Company. See "Certain Transactions."

Amortization of initial direct costs increased from $854,000 for the six
months ended June 30, 1996 to $1.2 million for the comparable period in 1997,
representing an increase of 43.1%. The increase was due primarily to an
increased average net investment in leases during the 1997 period over the
comparative prior year period. Additionally, initial direct costs, relative to
the investment in leases, increased from December 31, 1995 to December 31, 1996
(the beginning of the six month periods ended June 30, 1996 and 1997,
respectively), which resulted in increased amortization charges during the 1997
period as compared to the prior year.

25
<PAGE> 27

The provision for credit losses increased from $345,000 for the six months
ended June 30, 1996 to $402,000 for the comparative period in 1997, representing
an increase of 16.5%. This increase was due to increased originations offset by
a decrease in the provision rate (as a percentage of originations) due to
improved actual loss experience.

Other general and administrative expenses increased from $757,000 for the
six months ended June 30, 1996 to $1.1 million for the comparable period in
1997, representing an increase of 41.7%. The increase was due primarily to
increased trustee and legal fees incurred during the 1997 period, a significant
portion of which relates to the most recent securitization structure, and to
increased occupancy and related costs associated with supporting the Company's
growth.

Total expenses increased from $6.2 million for the six months ended June
30, 1996 to $8.4 million for the comparable period in 1997, representing an
increase of 36.2%.

As a result of the above factors, net income increased from $2.4 million
for the six months ended June 30, 1996 to $3.2 million for the comparable period
in 1997, an increase of 34.4%. After giving effect to the Restructuring which
would result in a minority interest charge of $481,000 and a provision for
income taxes of $982,000, pro forma net income for the six months ended June 30,
1997 would have been $1.7 million.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1995. Leases originated increased from $55.3 million for the year ended December
1995 to $80.6 million for the comparable period in 1996. The number of leases
originated increased from 1,370 for the year ended December 31, 1995 to 3,630
for the comparable period in 1996. The average yield of the portfolio of leases
serviced increased from 14.7% for the year ended December 31, 1995 to 15.2% for
the comparable period in 1996. The increase in dollar volume and the increase in
the yield of the portfolio of leases serviced were due to the increase in higher
yielding small ticket leases. The corresponding increase in the number of leases
was due to the increased number of small ticket leases to businesses in the
funeral home industry.

Lease contract revenue increased from $10.6 million for the year ended
December 31, 1995 to $16.8 million for 1996, representing an increase of 58.5%.
The increase in lease contract revenue was due to the increase in the Company's
average net investment in leases.

Fee income increased from $1.4 million for the year ended December 31, 1995
to $2.1 million for 1996, representing an increase of 51.5%. The increase in fee
income was primarily attributable to the increase in the amount of security
deposits recognized as income upon lease expiration.

Servicing and other income increased from $555,000 for the year ended
December 31, 1995 to $595,000 for 1996, representing an increase of 7.2%. This
increase was primarily attributable to an increase in interest income.

Total revenues increased from $12.5 million for the year ended December 31,
1995 to $19.5 million for 1996, representing an increase of 55.5%.

Interest expense directly associated with the Company's lease borrowings
increased from $4.5 million for the year ended December 31, 1995 to $6.4 million
for 1996, representing an increase of 42.6%. The increase in such interest
expense was primarily due to the increased borrowings attributable to the
increase in the Company's net investment in leases. At December 31, 1996, such
aggregate recourse and non-recourse borrowings had increased from $76.5 million
for the prior year to $122.2 million, representing an increase of 59.8%.

Compensation related expenses increased from $1.8 million for the year
ended December 31, 1995 to $2.9 million for 1996, representing an increase of
59.2%. The increase was due to management fees of $600,000 paid to PLM for
certain management, accounting, financial and other advisory services and
increases in the number of employees and compensation levels necessitated by the
growth of the Company. See "Certain Transactions."

Amortization of initial direct costs increased from $1.3 million for the
year ended December 31, 1995 to $1.9 million for 1996, an increase of 45.4%, due
primarily to the increase in investment in leases.

26
<PAGE> 28

The provisions for credit losses increased from $621,000 for the year ended
December 31, 1995 to $1.1 million for 1996, representing an increase of 83.1%.
The increase was primarily due to the increased investment in leases. See
"Business -- Collection Procedures and Policies." Charge-offs and delinquencies
as a percentage of leases serviced increased from 0.39% and 3.14%, respectively,
for the year ended December 31, 1995 to 0.64% and 5.63%, respectively, for 1996.
The increase in charge-offs was primarily due to two unusual charge-offs in the
independent grocery store industry. The primary reason for increased
delinquencies was temporary delays in collecting accounts which delays were
reduce at June 30, 1997.

General and administrative expenses, increased from $807,000 for the year
ended December 31, 1995 to $1.3 million for 1996, representing an increase of
66.7%. This increase was primarily due to the increased costs associated with
the increased lease originations for the year ended December 31, 1996, over the
prior year and from servicing such portfolio of leases.

Total expenses increased from $9.0 million for the year ended December 31,
1995 to $13.7 million for 1996, representing an increase of 51.2%.

As a result of the above factors, net income increased from $3.5 million
for the year ended December 31, 1995 to $5.8 million for 1996, representing an
increase of 66.5%. After giving effect to the Restructuring, which would result
in a minority interest charge of $874,000 and a provision for income taxes of
$1.8 million, pro forma net income for the year ended December 31, 1996 would
have been $3.2 million.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31,
1994. Leases originated increased from $34.3 million for the year ended December
1994 to $55.3 million for the comparable period in 1995. The number of leases
originated decreased slightly from 1,488 for the year ended December 31, 1994 to
1,370 for the comparable period in 1995. The average yield of the portfolio of
leases serviced decreased from 15.9% for the year ended December 31, 1994 to
14.7% for the comparable period in 1995. The increase in dollar volume and the
decrease in the number of leases were due to the relatively larger size of the
leases originated. This decrease in yield resulted primarily from the impact of
the Company's continuing focus on relatively larger lease transactions involving
lessees with relatively stronger credit (and hence lower implicit interest
rates) including high volume equipment provides programs.

Lease contract income increased from $7.1 million for the year ended
December 31, 1994, to $10.6 million for 1995, representing an increase of 48.9%.
The increase in lease contract income was due to the increase in the Company's
average net investment in leases.

Fee income increased from $607,000 for the year ended December 31, 1994 to
$1.4 million for 1995, representing an increase of 125%. The increase in fee
income was primarily attributable to the increase in lease originations.

Servicing and other income increased from $292,000 for the year ended
December 31, 1994 to $555,000 for 1995, representing an increase of 90.1%. This
increase was primarily attributable to an increase in interest income.

Total revenue increased from $8.0 million for the year ended December 31,
1994 to $12.5 million for 1995, representing an increase of 56.1%.

Interest expense directly associated with the Company's lease borrowings
increased from $2.6 million for the year ended December 31, 1994 to $4.5 million
for 1995, representing an increase of 74.3%. The increase in interest expense
was primarily due to the increased borrowings attributable to the Company's
aggregate lease portfolio. Such aggregate recourse and non-recourse borrowings
increased from $47.5 million at December 31, 1994, to $76.5 million at December
31, 1995, representing an increase of 61.1%.

Compensation related expenses increased from $1.5 million for the year
ended December 31, 1994 to $1.8 million for 1995, representing an increase of
21.0%. The increase was due to increases in the number of employees and
compensation levels necessitated by the growth of the Company.

27
<PAGE> 29

Amortization of initial direct costs increased from $848,000 to $1.3
million, an increase of 53.5%, due primarily to the increase in investment in
leases.

The provision for credit losses increased from $223,000 for the year ended
December 31, 1994, to $621,000 for 1995, representing an increase of 178.5%.
This increase was primarily due to the increased investment in leases. See
"Business -- Collection Procedures and Policies."

General and administrative expenses increased from $601,000 for the year
ended December 31, 1994 to $807,000 for 1995, representing an increase of 34.3%.
This increase was primarily due to the increased costs associated with the
increased lease originations for the year ended December 31, 1995, over the
prior year and from servicing such portfolio of leases.

Total expenses increased from $5.7 million for the year ended December 31,
1994 to $9.0 million for 1995, representing an increase of 57.3%.

As a result of the above factors, net income increased from $2.3 million
for the year ended December 31, 1994 to $3.5 million for 1995, representing an
increase of 53.1%.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires a substantial amount of cash to implement its business
strategy. The Company funds its operations primarily through securitizations and
bank borrowings. The Company will continue to require access to significant
additional funding to maintain and expand its volume of lease originations. See
"Risk Factors -- Liquidity and Capital Resources." The Company's most
significant use of cash includes the purchase of equipment subject to direct
financing leases and the principal payments on notes payable.

The following table sets forth the major components of the increase in cash
and cash equivalents:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used for)
operating activities.............. $5,670 $5,969 $10,704 $2,162 $(171)
Net cash provided by (used for)
investing activities.............. (22,595) (35,176) (49,815) (18,569) 31,528
Net cash provided by (used for)
financing activities.............. 18,640 29,385 42,852 17,230 (30,560)
-------- -------- -------- -------- --------
Net increase in cash and cash
equivalents....................... $1,715 $178 $3,741 $823 $797
======== ======== ======== ======== ========
</TABLE>

The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support lease originations and satisfy line
of credit repayment requirements. The Company generally maintains sufficient
cash and short-term investments to meet short-term liquidity needs. At June 30,
1997, cash and cash equivalents totaled $8.9 million or 7.1% of total assets. At
June 30, 1997, the Company maintained various lines of credit which provided for
immediately available advances of up to $42.5 million, and advances under these
lines of credit totaled $11.1 million.

Cash used in operating activities totaled $171,000 for the six months ended
June 30, 1997 compared to cash provided by operating activities of $10.7 million
and $6.0 million for the years ended December 31, 1996 and 1995, respectively.
This use of cash for operating activities in 1997 is attributed principally to
the non-cash gain on sale of leases of $3.4 million and decreases in payables of
$1.7 million during the six months ended June 30, 1997.

Cash provided by investing activities totaled $31.5 million for the six
months ended June 30, 1997, compared to cash used in investing activities of
$49.8 million and $35.2 million for the years ended December 31, 1996 and 1995,
respectively. Lease payments received and proceeds from leases sold in the six
months ended June 30, 1997 totaled $78.3 million as compared to $36.6 million
and $21.0 million in the years

28
<PAGE> 30

ended December 31, 1996 and 1995, respectively. Cash used for equipment
purchased for leases originated in these same periods totaled $45.2 million,
$82.1 million and $53.8 million, respectively.

Cash used for financing activities was $30.6 million during the six months
ended June 30, 1997, consisting principally of $24.3 million of borrowings under
line of credit arrangements to fund lease originations and paydowns of those
lines of credit of $54.4 million upon receipt of proceeds from the sale of
leases. Financing activities provided cash of $42.9 million and $29.4 million
during the years ended December 31, 1996 and 1995, respectively, principally
resulting from borrowings to finance leases of $76.1 million and $107.9 million,
less pay downs on such borrowings of $30.4 million and $78.9 million during the
years ended December 31, 1996 and 1995, respectively.

SECURITIZATIONS. Securitizations involve the pooling of lease receivables
for sale in the secondary market. The primary advantages of securitizations
include: (i) quick access to significant amounts of capital to fund growth in
lease originations; (ii) relatively lower cost of funds than commercial bank
financing; and (iii) greater flexibility with respect to sources of funding.
From 1992 through June 30, 1997 the Company has completed the following
securitizations:

<TABLE>
<CAPTION>
COMMENCEMENT
DATE AMOUNT RATING AGENCY SUBORDINATION LEVEL
- ------------------------------- -------------- -------- -------------- -------------------
<S> <C> <C> <C> <C>
April 1992..................... $12.1 million AA+ Duff & Phelps 20%
May 1993....................... 10.6 million AAA/Aaa S&P/Moody's 13%
June 1994...................... 30.0 million A-1/P-1 S&P/Moody's 13%
July 1995...................... 90.0 million AAA/Aaa S&P/Moody's 8%
February 1997.................. 54.2 million AAA/Aaa S&P/Moody's 8%
---------------
TOTAL..................... $196.9 million
</TABLE>

The Company believes that it was one of the first independent leasing
companies to enter into the asset backed securitization market. The Company has
recently entered into its fifth securitization, which is a $100 million
three-year revolving commercial paper based conduit facility with CoreStates
Bank, N.A. Under this facility, the Company contributes its leases (including
related residuals) to a special purpose limited liability entity. Such entity
sells the leases to an owner trust and the owner trust then sells certificates
backed by the leases to an unaffiliated special purpose corporate entity which
administers a multi-seller commercial paper conduit. The transfer and sale of
lease receivables under the commercial paper facility is treated as a sale for
financial reporting purposes and the related gain on sale is recognized on the
date of such sale. The Company expects to increase the commercial paper facility
to $200 million later in 1997.

The Company continually seeks to improve the efficiency of its
securitizations. In the Company's fifth securitization the subordination level
was 8% and the spread was 65 basis points over comparable United States Treasury
securities. The effect of these reduced subordination levels and spreads has
been to decrease the effective cost of the securitizations to the Company.

The Company has been able to finance substantially all of its lease
originations without impairing its working capital. Cash used for principal
payments on notes payable is principally generated from the monthly lease
payments which are pledged as collateral for the notes. See "Risk
Factors -- Dependence on Securitizations."

BANK LINES OF CREDIT. The Company currently maintains an aggregate of $40.0
million in secured lines of credit to finance equipment purchases subject to
direct financing leases. At June 30, 1997, the Company had an aggregate of $31.4
million available under such lines of credit. These lines of credit include: (i)
a $15.0 million line of credit with Seafirst Bank under which interest is
payable monthly at a rate of LIBOR plus 2% (although this line of credit expired
in May 1997, Seafirst Bank has continued to make advances thereunder and the
Company has negotiated an extension to May 1998); (ii) a $10 million line of
credit with CoreStates Bank, N.A. under which interest is payable at the annual
Eurodollar rate (this line of credit expires on October 30, 1997); (iii) a $7.5
million line of credit with Key Bank of Washington under which interest is
payable monthly at a rate of LIBOR plus 2.0% (this line of credit was renewed on
August 12, 1997

29
<PAGE> 31

for the amount of $5.0 million under which interest is payable monthly at a rate
of LIBOR plus 2% and expires on July 31, 1998); and (iv) a $10 million line of
credit with U.S. Bank of Washington under which interest is payable monthly at
the higher of such bank's prime rate or LIBOR plus 1.75% (this line of credit
expires in October 1997). These lines of credit are secured by the leases
financed with funds therefrom and a guarantee from Funding VI and senior
management of the Company, and limit the amount of funds which may be advanced
to the Company to a percentage of the discounted value of such leases. See Note
3 to T&W Financial Corporation and Affiliates Financial Statements.

The Company also maintains an additional aggregate of $3.0 million in an
unsecured line of credit from a bank and a credit arrangement with PLM to
finance internal operations and the purchase of leases prior to their
securitization or placement on "lease-line" secured credit facilities. At June
30, 1997, the Company had an aggregate of $1.35 million available thereunder.
See "Certain Transactions -- P.L.M. Consulting Group, L.L.C."

The Company recently entered into a commitment letter with CoreStates Bank,
N.A. for a secured line of credit in the amount of $50 million, which would
replace the existing CoreStates Bank, N.A. line of credit. The facility would be
utilized for the financing of eligible leases and loans at an interest rate of
LIBOR plus 1.5%. Such credit facility would be secured by the leases financed
with funds from such credit facility and by a guarantee from Funding Company VI
and senior management of the Company, and would limit the amount of funds which
may be advanced to the Company to a percentage of the discounted value of such
leases.

The Company believes, based on its historical cash requirements and
anticipated uses of cash, that the cash derived from this Offering and the
Company's operating, investing and financing activities will be sufficient to
meet its cash requirements and implement its business plan through the end of
1998. See "Risk Factors -- Liquidity and Capital Resources" and "-- Dependence
on Bank Financing."

IMPACTS OF INFLATION AND CHANGING PRICES

The combined financial statements and related financial data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation is reflected in the increased cost of the Company's
operations. As a result, interest rates generally have a more significant impact
on the Company's performance than do general levels of inflation. Interest rates
do not necessarily move in the same direction or the same extent as the prices
of goods and services. See "Risk Factors -- Interest Rate Risk."

IMPACTS OF RECENTLY ISSUED ACCOUNTING STANDARDS

EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS -- Recently issued
accounting standards having relevant applicability to the Company consist
primarily of Statement of Financial Accounting Standard No. 125 ("SFAS No. 125")
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which is effective for transactions occurring after 1996,
applied prospectively. The primary effect of adoption of SFAS No. 125 is in the
recording of an asset relating to the present value of the net cash flow
resulting from servicing assets for leases sold. Other relevant recently issued
accounting standards consist of Statement of Financial Accounting Standard No.
128 "Earnings per Share" Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information",
each of which relate to additional reporting and disclosure requirements
effective for financial statement periods beginning after December 15, 1997. It
is not expected that the adoption of these accounting pronouncements will have a
material effect on the Company's operating results or financial condition.

30
<PAGE> 32

BUSINESS

OVERVIEW

T&W Financial Corporation is a specialized commercial finance company that
provides equipment financing, principally in the form of leases, to small and
medium-sized businesses. The Company originates leases through direct
relationships with Equipment Providers that generally offer the Company's
leasing services as a preferred method of financing equipment sales. The Company
also originates leases through referrals from financial institutions and other
lessors. The Company is a "credit lender" and, as such, its underwriting
policies and procedures focus on the creditworthiness of the lessee rather than
the value of the equipment financed. The Company concentrates on "prime
credits," which it defines as lessees that have been under the same ownership
for at least 10 years and have a record of meeting their financial obligations.
T&W has been continuously engaged in the leasing business since 1976, and as of
June 30, 1997, the Company's portfolio of leases serviced totaled $174.7 million
and included over 7,200 leases.

The Company attributes its strong financial performance to adherence to a
consistent operating strategy. The Company's operating strategy is to: i)
provide on-going, high quality service and support to Equipment Providers and
lessees; ii) maintain strong credit quality; iii) access low-cost funding
through securitizations; and iv) maintain efficient operations and relatively
low overhead costs. The Company believes that its operating strategy provides
multiple opportunities for continued growth. The Company's growth strategy is
to: i) finance additional types of equipment in industries it currently serves;
ii) develop strategic alliances with leading Equipment Providers to finance a
higher share of their equipment sales; iii) continue expansion within its
existing industries throughout the United States and Canada; iv) generate
additional equipment and non-equipment financing from its existing lessees and
from referral sources; v) pursue selected acquisitions of other companies to
expand in existing and enter into new industries; and vi) develop relationships
in new industries. As part of its expansion strategy, in June 1997, the Company
acquired the assets of Commercial Capital, a specialized commercial lease
finance company located near Kansas City, Missouri.

COMMERCIAL FINANCE INDUSTRY

The equipment financing industry in the United States has grown rapidly
during the last decade and includes a wide range of entities that provide
funding for the purchase of equipment. According to research by the ELA using
United States Department of Commerce data, the financing of capital equipment by
businesses through leasing increased from approximately $122 billion in 1992 to
approximately $169 billion in 1996, and represented approximately 30% of the
$563 billion spent on productive assets in 1996.

The Company believes that "small ticket" equipment leasing is one of the
most rapidly growing segments of the industry primarily due to: (i) the
increasing acceptance of leasing by small and medium-sized businesses as a means
of financing the acquisition of capital equipment; (ii) the consolidation of the
banking

31
<PAGE> 33

industry, which has led to diminished service to small and medium-sized
businesses; and (iii) the recognition by small and medium-sized businesses that
specialized lease financing companies, such as T&W, can provide faster and more
direct services than traditional financial institutions.

OPERATING STRATEGY

The Company has operated its business based on adherence to a strategy that
stresses a high level of customer service, strong credit quality, low-cost
funding and efficient operations.

CUSTOMER SERVICE. The Company strives for excellence in service to
Equipment Providers and lessees. The Company encourages high-quality service by
providing its employees with monthly economic incentives tied to this goal. A
key aspect of the Company's customer service is its ability to process and
respond to credit applications rapidly. T&W's application process is designed to
be simple and easy to understand. The Company typically approves transactions
under $50,000 within 1 to 2 business days and approves transactions greater than
$50,000 within 3 to 5 business days.

The Company is also flexible and willing to work with potential lessees to
create customized financing packages. The Company's expertise within selected
industries allows the Company to customize its leases to fit the needs of
lessees and allows Equipment Providers to offer integrated sale and financing
transactions. For example, in industries that are seasonal in nature, a step
payment plan may be adopted which ties lease payments to the seasonal nature of
the industry. The term of the Company's leases are also variable, ranging from
12 to 84 months.

STRONG CREDIT QUALITY. The Company concentrates on "prime credits," which
it defines as lessees that have been under the same ownership for at least 10
years and have a record of meeting their financial obligations. See
"-- Underwriting." As a credit lender, T&W believes it has differentiated itself
from many commercial finance companies which are asset-based lenders. T&W bases
its credit decisions primarily on the creditworthiness of the lessee and the
lessee's owners rather than the value of the equipment financed. The Company
believes its focus on the creditworthiness of its lessees, plus careful
underwriting, have resulted in a high return on its assets.

LOW COST FUNDING. Securitizations have provided the Company with a
relatively low cost of funds to purchase the equipment that it leases. The
Company believes that it was one of the first independent leasing companies to
enter into the asset-backed securitization market by completing a $12.1 million
securitization. Through June 30, 1997, the Company has raised $196.9 million
through securitizations. In the Company's fifth securitization the subordination
level was 8% and the spread was 65 basis points over comparable United States
Treasury Securities.

OPERATING EFFICIENCY. In addition to providing a high degree of customer
service, the Company believes that operating efficiency is a key factor in
achieving high profitability. Operating efficiency is enhanced by the Company's
focus on marketing through Equipment Providers in selected industries,
maintaining strong credit quality and centralizing its operations.

GROWTH STRATEGY

The Company's objective is to become one of the leading providers of
equipment lease financing to small and medium-sized businesses in specific
industries. The Company believes that it has significant opportunities to expand
its operations as spending on equipment rises and small and medium-sized
businesses increasingly use leasing to finance equipment purchases. The
Company's specific strategies for achieving growth are:

INCREASED EQUIPMENT FINANCING WITHIN INDUSTRIES. Within certain industries,
the Company has strong relationships with Equipment Providers but these
Equipment Providers may only provide a portion of the equipment utilized in the
particular industry. The Company believes its expertise in certain industries
provides opportunities to develop relationships with other Equipment Providers,
thereby expanding the types of equipment financed within a particular industry.
For example, in the horticulture industry the Company provides financing for
horticulture automation equipment, and has recently begun financing other types
of horticulture equipment, such as greenhouses.

32
<PAGE> 34

STRATEGIC ALLIANCES WITH EQUIPMENT PROVIDERS. The Company is working to
develop strategic alliances with selected Equipment Providers through its "Sales
Maximizer Program." The program would involve the formation of a joint venture
between the Company and an Equipment Provider. The joint venture would purchase
equipment from the Equipment Provider and then lease the equipment to the
lessee. The Sales Maximizer Program would be beneficial to the Company and the
Equipment Provider because it would allow both to realize certain tax benefits,
enable the Equipment Provider to increase sales and customer allegiance, and
allow the Company to enhance its relationship with the Equipment Provider,
increase its share of the Equipment Provider's sales and initiate relationships
with new lessees. In connection with the program, the Equipment Provider would
assume a portion of the residual and remarketing risks on the financed
equipment. As of September 25, 1997, the Company has developed a strategic
alliance with an Equipment Provider. See "Risk Factors -- New Product
Offerings."

GEOGRAPHIC EXPANSION. While the Company currently finances equipment
throughout the United States and Canada, in many cases its relationships with
Equipment Providers in particular industries have been regionally focused. The
Company plans to expand its regional participation in certain industries
nationwide and in Canada. For example, the Company had traditionally dealt with
independent grocery cooperatives primarily in the Northwest, but over the last
several years has begun to develop relationships with independent grocery
cooperatives in other regions based on its expertise in this industry. T&W's
most significant presence is in the States of Washington, California, Texas and
New York, representing approximately 34%, 9%, 5% and 4%, respectively, of the
Company's portfolio of leases serviced as of June 30, 1997. See "Risk Factors --
Geographic and Industry Concentration Risks."

EXPANDED MARKETING TO EXISTING LESSEES. Although the Company has
experienced significant repeat business through its relationships with Equipment
Providers, the Company believes opportunities exist to expand originations with
current and past lessees, both through the financing of additional equipment
purchases and through the introduction of financing to support other areas of
their businesses that may not be associated with their current leases, such as
loans for facility construction or expansion. As of June 30, 1997, the Company
had an aggregate of $1.7 million outstanding in such non-lease financing solely
in the independent grocery store industry. See "Risk Factors -- Risks Associated
with New Product Offerings.

ACQUISITIONS. Where appropriate, the Company plans, as part of its
expansion strategy, to pursue acquisitions of other finance companies such as
its acquisition of Commercial Capital. The Commercial Capital acquisition will
enable the Company to expand its presence in the independent grocery store
industry, particularly in the Midwest where Commercial Capital is seeking to
develop a strong relationship with a national grocery wholesaler. See "-- Recent
Acquisition." The Company intends to target acquisition opportunities that will
enable it to build upon existing industries or enter into new industries.
Additionally, the Company believes it can utilize its access to relatively lower
cost of funds to enhance the financial performance of acquired companies.
Currently, the Company has not targeted any other specific acquisitions. See
"Risk Factors -- Acquisition Risks."

RELATIONSHIPS IN NEW INDUSTRIES. The Company is constantly investigating
opportunities to develop relationships in new industries, including but not
limited to aviation support, water well drilling and automobile franchises. The
Company intends to focus on new industries that provide potential for growth
while maintaining credit quality.

33
<PAGE> 35

MARKETING

Approximately 46.2% of the Company's portfolio of leases serviced consist
of leases in selected industries where the Company has focused its marketing
efforts:

PORTFOLIO OF LEASES SERVICED AT JUNE 30, 1997

<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY PORTFOLIO(1)
-------------------------------------------------------------- ---------------------
<S> <C> <C>
Selected Industries........................................... 46.2%
Fast Food Franchises........................................ 12.2%
Independent Grocery Stores.................................. 10.6%
Funeral Homes............................................... 8.6%
Hospitality................................................. 8.5%
Liquid Waste Disposal....................................... 3.9%
Horticulture................................................ 2.4%
Other Industries.............................................. 53.8%
------
100.0%
</TABLE>

- ---------------

(1) Percentages are approximate and are based upon Standard Industrial
Classification codes.

SELECTED INDUSTRIES. The Company focuses its marketing efforts in specific
industries where it develops direct relationships with Equipment Providers.
Relationships with Equipment Providers are based on informal arrangements
whereby T&W generally does not pursue relationships with competitors of the
Equipment Provider and the Equipment Provider generally does not promote
competitive sources of equipment financing. The Company provides marketing
materials to Equipment Providers which include the specific Equipment Provider's
name and promote leasing from T&W as a cost-effective method of financing
equipment purchases. The marketing representatives of the Equipment Providers
then use such marketing materials as part of their overall sales presentation.

The Company believes that it has developed strong relationships with
Equipment Providers by providing lessees with excellent customer service,
including a rapid response to credit applications and flexible lease terms that
are tailored to the specific needs of lessees. Equipment Providers benefit from
the Company's knowledge of and active participation in their businesses,
including joint marketing efforts and attendance at industry trade shows. As a
result, many of the Equipment Providers are continuing sources of a significant
amount of leases originated by the Company. The principal industries where the
Company has relationships with Equipment Providers include fast food franchises,
independent grocery stores, funeral homes, hospitality, liquid waste disposal
and horticulture. Although the Company does not currently rely on brokers to
originate leases it may choose to do so in the future. See "Risk
Factors -- Relationships with Equipment Providers."

Fast Food Franchises. Since 1992, the Company has originated equipment
leases to recognized fast food franchises, including Mrs. Fields and Subway. T&W
is an approved lender for these franchises. Typically, the franchisor provides
not only the equipment necessary for the franchisee's business, but also access
to potential financing sources for such equipment. Such equipment includes
ovens, fryers, refrigeration units and point of sale equipment. The Company
believes that the nature of the franchisor/franchisee relationship reduces the
risk that the Company will suffer losses on leases to fast food franchisees
because the franchisor is generally motivated to find a replacement if the
franchisee does not perform. At June 30, 1997, leases to fast food franchises
represented 12.2% of the Company's portfolio of leases serviced.

Independent Grocery Stores. The Company originates leases for the
purchase of equipment for use by independent grocery stores. Such equipment
includes refrigeration units, point of sale equipment and shelving as well as
other essential equipment. According to the Progressive Grocer Annual Report
published in April 1997, based on data from the National Grocers Association,
there are currently 10,980 independent grocery stores in the United States and,
at June 30, 1997, 90 independent grocery stores were lessees of T&W. At June 30,
1997, leases to independent grocery stores represented 10.6% of the Company's
portfolio of leases serviced.

34
<PAGE> 36

Cooperative associations of independent grocery stores and independent
grocery store wholesalers buy equipment directly from manufacturers at a
discount for resale to independent grocery stores, allowing the independent
grocer to purchase equipment at a price similar to that paid by supermarket
chains. The Company has developed strong but non-exclusive relationships with
several leading cooperatives and wholesalers, including Associated Foods and
Super Valu. These cooperatives and wholesalers refer independent grocery stores
to T&W, promoting it as one of their recommended financial service providers.
The Company's relationship with cooperatives and wholesalers began in 1972 when
Michael A. Price, the founder of the Company, started working with equipment
manufacturers who provide equipment to cooperatives and wholesalers for resale
to independent grocery stores. The Company actively participates in the
independent grocery store industry through its membership in the National
Grocers Association, Ohio Grocers Association and Oregon Grocery Industry
Association, and its participation in industry trade shows.

The Company has expanded its financing opportunities by providing financing
not only for equipment purchases by independent grocery stores but also for
facility construction and expansion. The Company believes that such expansion
complements its existing leasing products and provides significant opportunities
for additional financings for its existing lessees.

Funeral Homes. The Company originates leases for operators of funeral
homes. Since 1987, T&W has financed audio and visual equipment used by the
funeral home industry, and currently is actively pursuing relationships with
other Equipment Providers, such as manufacturers of hearses, crematory equipment
and floral refrigeration units. The Company has attempted to increase its
visibility in the industry through its participation in industry trade shows. At
June 30, 1997, leases to businesses in the funeral home industry represented
8.6% of the Company's portfolio of leases serviced.

Hospitality. Since 1987, the Company has originated leases from
hoteliers and hotel franchisees for equipment acquisitions through its
relationship with hotel management companies such as West Coast Hotels and hotel
franchises such as Holiday Inns. Historically, the Company has financed
telephone and reservation systems; however, recently the Company has begun to
finance equipment for "food courts" comprising fast food franchises located in
hotels. The Company actively participates in the hospitality industry through
participation in industry trade shows. At June 30, 1997, leases to businesses in
the hospitality industry represented 8.5% of the Company's portfolio of leases
serviced.

Liquid Waste Disposal. Since 1989, the Company has originated leases for
the purchase of liquid waste disposal equipment, including storage containers
ranging in size from portable toilets to portable holding tanks. The Company
actively participates in liquid waste disposal industry trade shows and is a
member of the Portable Sanitation Association International.

T&W has developed a strong relationship with a leading manufacturer of
portable toilets, which actively markets T&W to its customers. The Company is
currently exploring the possibility of expanding its business with this
manufacturer through its Sales Maximizer Program discussed above.

The Company also originates leases for sewer and septic cleaning and
maintenance equipment for franchisees. T&W is a recommended financing service
company for a national sewer and septic cleaning and maintenance franchisor. At
June 30, 1997, leases to businesses in the liquid waste disposal industry
represented 3.9% of the Company's portfolio of leases serviced.

Horticulture. The Company originates leases for the purchase of
horticultural equipment from leading horticulture equipment manufacturers. The
horticultural equipment is used by wholesale and retail nurseries to automate
and expand their production. The Company actively participates in the
horticulture industry through its membership in the Ohio Florist's Association
as well as participation in industry trade shows. The Company has developed a
strong relationship with a leading manufacturer of automated pot filling,
planting and watering equipment. The Company has also begun leasing other types
of equipment including greenhouses from other manufacturers. At June 30, 1997,
leases to businesses in the horticulture industry represented 2.4% of the
Company's portfolio of leases serviced.

OTHER INDUSTRIES. Approximately 53.8% of the Company's portfolio of leases
serviced consists of leases originated through direct contacts with Equipment
Providers and equipment users in a wide variety of

35
<PAGE> 37

other industries as well as through referrals. The Company believes that it has
the opportunity to develop significant new originations in other industries. The
Company's marketing personnel are constantly developing contacts in new
industries and expanding contacts within industries already serviced by the
Company.

In addition to its focus on specific industries, the Company originates
leases based on referrals from existing lessees, regional and community banks,
other financial institutions and other lessors, who are unwilling to provide
financing to the lessee or may not have the underwriting, servicing or financial
capability to do so. A number of regional and community banks refer business to
the Company rather than refer the business to competing banks. The Company has
developed strong relationships with a number of the regional and community banks
and other financial institutions in the Northwest. The Company is a member of
the Washington Bankers Association and actively participates in its conferences
and meetings. A referral fee is paid to the referring bank or lessor.

RECENT ACQUISITION

On June 2, 1997, the Company acquired substantially all of the assets and
liabilities of Commercial Capital for approximately $5.5 million. Commercial
Capital is an equipment leasing business located near Kansas City, Missouri
which focuses on small ticket equipment leases. Commercial Capital's lease
originations for the year ended October 31, 1996 totaled approximately $13.6
million. The acquisition expanded the Company's presence in the Midwest and the
Company will continue to operate Commercial Capital's former office near Kansas
City as a lease production facility.

The purchase price was comprised of 10% cash and a promissory note for the
remainder. The promissory note bears interest at 8%, and is payable in equal
quarterly installments of principal and interest over a ten year period ending
April 1, 2007. In addition, an amount equal to 15% of the purchase price is
payable under (and subject to deduction from) the promissory note upon the one
year anniversary date of the effective date of this Offering. The promissory
note is secured by the acquired assets and guaranteed by the Company and by
Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. The
business combination has been accounted for utilizing the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based upon estimated fair values. The estimated
fair value of assets acquired in the acquisition approximated $7.1 million,
including intangible assets of approximately $2.2 million, and the estimated
fair value of liabilities assumed approximated $1.6 million. Intangible assets
recorded in purchase accounting are amortized over their respective estimated
lives, which range from 5 to 10 years.

In connection with the Company's acquisition of Commercial Capital, the
Company entered into employment agreements with two principals of Commercial
Capital, James R. Neese and Larry E. Rice. The employment agreements provide,
among other things, that in the event that the Company completes the Offering
the Company shall grant to each of Messrs. Neese and Rice an option to acquire
22,000 shares of Common Stock as of the effective date of the Offering at an
exercise price equal to the initial public offering price. Such options shall
vest 20% per year over a five year period and shall be governed by the terms and
conditions of the Company's 1997 Stock Option Plan. See "Management -- Benefit
Plans."

TERMS OF EQUIPMENT LEASES

Substantially all equipment leases acquired or originated by the Company
are non-cancelable by the lessee. During the term of the lease, the Company
generally receives scheduled payments sufficient, in the aggregate, to cover the
Company's borrowing costs and the costs of the underlying equipment and to
provide the Company with an acceptable profit margin. The term of the lease is
equal to or less than the equipment's estimated economic life and generally
ranges from 12 to 84 months, with a weighted average initial term of 44 months
for leases originated in the first six months of 1997.

The standard terms and conditions of the Company's leases require lessees
to: (i) use the equipment in a careful manner and make all necessary repairs;
(ii) bear the entire risk of loss, theft, damage or destruction of the
equipment; (iii) insure the equipment against loss, theft, damage or
destruction; (iv) pay all charges and taxes associated with the equipment; and
(v) make all scheduled contract payments regardless of loss, theft,

36
<PAGE> 38

damage or destruction of the equipment. The Company's standard forms of lease
provide that in the event of a default by the lessee, the Company may, at its
election: (i) repossess and remove the equipment for re-lease or subsequent
sale; (ii) require the lessee, at its expense, to return the equipment in good
repair to such place as the Company may specify; (iii) cancel or terminate the
lease and retain any and all prior payments; (iv) accelerate the future payments
due under the lease; and (v) sue for and recover from the lessee the sum of all
unpaid rents and other payments due under the lease then accrued. All additions,
repairs or improvements made to the equipment, regardless of the source of
payment, are automatically incorporated into and deemed a part of the equipment
and belong to the Company.

Generally, the Company requires the lessee and its owners to guarantee that
the Company will receive a specific amount of proceeds upon sale of the
underlying equipment at the end of the lease term. The terms of the guarantee
require the lessee to pay the Company in cash any deficiency between the
guaranteed amount of sale proceeds and the actual amount of sale proceeds. See
"Risk Factors -- Residence Value Risk."

UNDERWRITING

The Company has developed credit underwriting procedures and policies that
it believes are effective in identifying creditworthy lessees and minimizing the
risks of delinquencies and charge-offs. The Company reviews individual leases
for compliance with lease underwriting guidelines prepared by the Company's
Credit Committee, currently consisting of the Company's Chairman, President and
Assistant Vice President-Credit Operations.

CREDIT PROCEDURES. The lessee approval process begins with the submission
by the lessee of a credit application, at which time the Company conducts its
own independent credit investigation through recognized commercial credit
reporting agencies such as Dun & Bradstreet, Equifax, Inc. and Experian. The
credit application is then reviewed by the Assistant Vice President-Credit
Operations. Credit applications involving more than $40,000 but less than
$100,000 must be reviewed by two members of the Company's Credit Committee, and
transactions involving more than $100,000 must be reviewed by all three members
of the Credit Committee.

In order to provide prompt service, the Company generally approves the
application within 1 to 2 business days of receipt if the transaction is for
less than $50,000 and within 3 to 5 business days if the transaction is for
$50,000 or more. The Company believes the response time for approval of a credit
application is usually important to the lessee, because the Company's leases
typically involve equipment important to the operation of the lessee's business.

After an application has been approved, the Company requires receipt of
signed documents on the Company's standard forms, or other pre-approved forms,
before funding. Once the equipment is shipped and installed, the Equipment
Provider invoices the Company, and thereafter the Company's funding and
documentation department verifies that the lessee has received and accepted the
equipment. Upon the lessee's authorization of payment to the Equipment Provider,
the lease is forwarded for funding, accounting and billing.

CREDIT POLICIES. The Company's lease underwriting guidelines generally
require verification of the lessee's time in business (10 years is the preferred
minimum), corporate name, bank account information, a credit investigation of
the personal credit of the owners, partners or principals of the lessee, and at
least three trade references. Most credit applications are evaluated under a
credit grading model which serves as an indicator for further evaluation by the
Company's Credit Committee.

The Company's credit grading model is based on the following factors
relating to the lessee: (i) length of time in business; (ii) primary standard
industrial classification code number or industry classification; (iii) the
average balance in the lessee's bank account generally over the last three
months; (iv) the bank's rating of the customer; (v) bank loan payment history;
(vi) length of relationship with the bank; (vii) trade payment history; (viii)
length of relationship with trade references; (ix) landlord payment history; (x)
the lessee's status with the Secretary of State of its state of incorporation;
(xi) personal credit history of the lessee's owner(s) or principal(s); (xii) the
lessee's Dun & Bradstreet rating; and (xiii) the payment history with the

37
<PAGE> 39

Company, if any. Each factor is allocated a score from one through five by the
Company. After scoring each factor, an average is taken of the scores for each
of the factors. If the average is three or greater the Company will generally
approve the credit application. If the average is less than three, the Company
may still evaluate the credit application based on a determination by the
Company's Assistant Vice President -- Credit Operations. However, the
application must be further evaluated by an additional member of the Company's
Credit Committee, who may approve or deny the credit application.

Transactions involving more than $50,000 also require the submission of two
years of financial statements and an interim financial statement. If year-end
financial statements are not audited or reviewed, corresponding tax returns are
required. Personal tax returns of the owners or principals of the lessees are
also required. Transactions involving $75,000 or more require an additional year
of financial statements. In addition, the Company evaluates certain financial
aspects of the lessee specific to the particular transaction, including its debt
to equity ratios, cash flow and equity coverage, assets, sales, inventory,
accounts receivable and accounts payable, based on industry standards formulated
by Robert Morris and Associates. The Company generally requires personal
guarantees by the principals or owners of the lessee, including guarantees of
the amount of sale proceeds from the underlying equipment at the end of the
lease term.

The Company adheres to strict guidelines in order to preserve lessee and
industry diversity within its portfolio of leases serviced, thus minimizing the
risk associated with lessee location, lessee obligation and industry cycles.
Diversification standards are also imposed by the Company's securitization
programs. As of June 30, 1997, no single industry accounted for more than 12.2%
of its portfolio of leases serviced and no single lessee accounted for more than
3% of the Company's portfolio of leases serviced. In connection with the
Company's securitizations, reviews of the Company's underwriting standards and
procedures are conducted by insurers and rating agencies.

SERVICING AND ADMINISTRATION

The Company's strategy has been to retain the servicing rights for
substantially all of the leases it originates. The Company's lease servicing
activities generally include: billing; collecting and remitting lease payments;
contacting delinquent obligors; handling obligor defaults; recording security
interests; investor and securitization reporting; portfolio management
reporting; conducting foreclosure proceedings; disposing of foreclosed
properties and otherwise administering the leases. As of June 30, 1997, the
Company serviced over 7,200 leases.

The Company receives a monthly servicing fee for all leases, plus late
fees, if any, which are collected from monthly lease payments.

The following table sets forth information regarding the Company's
portfolio of leases serviced:

<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------------------------- ----------------
1992 1993 1994 1995 1996 1997
--------------- --------------- --------------- --------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT NO.
------- ------ ------- ------ ------- ------ ------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period.... $23,518 1,600 $21,649 1,610 $38,436 2,554 $61,797 3,517 $ 97,772 4,086 $148,086 6,983
Originations(1)................. 9,833 711 21,703 993 34,290 1,488 55,348 1,370 80,638 3,630 49,245 1,257
Runoff.......................... 11,702 701 4,916 49 10,929 525 19,373 801 30,324 733 22,602 985
------- ----- ------- ----- ------- ----- ------- ----- -------- ----- -------- -----
Balance, end of period(2)....... $21,649 1,610 $38,436 2,554 $61,797 3,517 $97,772 4,086 $148,086 6,983 $174,729 7,255
======= ===== ======= ===== ======= ===== ======= ===== ======== ===== ======== =====
</TABLE>

- ---------------

(1) Represents the equipment cost (or the acquisition cost in the case of
Commercial Capital) for leases originated during the period.

(2) Represents the aggregate of minimum lease payments, excluding residual
values, under all leases serviced by the Company and either held as direct
financing leases or sold.

38
<PAGE> 40

COLLECTION PROCEDURES AND POLICIES

The Company manages its risk of credit losses through adherence to its
underwriting guidelines and prompt and diligent collection procedures. All
collection activity is entered into a computerized collection system with
activity notes entered directly into the collection system in order to
facilitate routine collection activity. Collectors have available at their
computer terminals the latest status and collection history on each account.

The Company's practice with respect to collections is as follows: on the
day on which a lease becomes 10 days delinquent, T&W's credit and collection
review system generates a computerized late notice which is sent directly to the
lessee. Telephone contact is normally initiated when an account is 15 days past
due, but may be initiated more quickly. A late charge is assessed to the lessees
20 days after the payment due date. When an account becomes 30 days past due, a
default letter is sent to the lessee and to anyone providing personal guarantees
on the lease. An acceleration letter is sent to all lessees and guarantors when
a lease becomes 40 days past due. Telephone contact is continued throughout the
delinquency period. Accounts which become over 90 days past due are subject to
repossession of the equipment and action by the Company's agencies and
attorneys. The Company utilizes two outside companies who specialize such
collection proceeding and have been working for the Company for the last 12
years. Prior to being charged-off (which is generally prior to the lease being
180 days delinquent), each lease is evaluated on the merits of its specific
circumstances, with consideration of the value of the equipment as well as the
current financial strength of the lessee and guarantors.

The following table sets forth certain information with respect to the
Company's delinquent leases:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Delinquencies as a percentage
of portfolio of leases
serviced
31-60 days past due............ 4.40% 2.50% 2.52% 1.50% 2.89% 1.19%
61-90 days past due............ 1.40% 0.31% 0.42% 0.86% 1.38% 1.24%
91-120 days past due........... 0.47% 0.10% 0.15% 0.78% 0.32% 0.98%
Over 120 days.................. -- 0.99% 0.90% -- 1.04% 0.96%
------- ------- ------- ------- ------- -------
Total.......................... 6.27% 3.90% 3.99% 3.14% 5.63% 4.37%
======= ======= ======= ======= ======= =======
</TABLE>

As a result of the Company's credit underwriting policies and collection
procedures, the Company's net chargeoffs of delinquent leases as a percent of
the net investment in leases has been generally low. The following table sets
forth certain information with respect to the Company's net charge-offs:

<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross charge-offs.............. 1.21% 0.53% 0.29% 0.49% 1.53% 0.31%
Recoveries..................... (0.85%) (0.44%) (0.27%) (0.10%) (0.89%) (0.04%)
------- ------- ------- ------- ------- -------
Net charge-offs(1)............. 0.36% 0.09% 0.02% 0.39% 0.64% 0.27%
======= ======= ======= ======= ======= =======
</TABLE>

- ---------------

(1) Represents charge-offs (reduced by recoveries), divided by the respective
period's average minimum lease payments, including residuals, under all
leases serviced by the Company and either held as direct financing leases or
sold. Interim data is provided on an annualized basis.

The allowance for credit losses is maintained by the Company at a level
that it believes is sufficient to absorb probable losses. The Company determines
the adequacy of the allowance based upon reviews of individual leases,
historical loss experience, current economic conditions, the known and inherent
risk characteristics of the various categories of leases and other pertinent
factors. Leases determined uncollectible are charged to the allowance.
Provisions for losses and recoveries on leases previously charged-off are added
to the allowance.

39
<PAGE> 41

MANAGEMENT INFORMATION SYSTEM

The Company's servicing operations are currently operated on a local area
network. Management continually evaluates the need to update and expand its
current systems. Such program includes upgrading and enhancing the Company's
current software application programs. The Company is evaluating certain
document imaging technologies and direct Internet communications with Equipment
Providers and lessees. Such technology would allow Equipment Providers and
lessees to communicate directly with the Company, including submitting lease
applications, checking the status of applications and leases and printing
documents remotely. Management believes that such technologies will increase the
efficiency of the Company's underwriting and servicing operations.

SERVICE MARK

"T&W" is a service mark of the Company and is registered for use in the
United States. The Company's name is regarded as a valuable asset.

COMPETITION

The "small ticket" equipment leasing market is highly competitive. The
Company competes with a number of national, regional and local finance
companies, Equipment Providers that provide financing for the sale or lease of
equipment themselves and traditional financial services companies, such as
commercial banks and savings and loan associations, many of whom possess
substantially greater financial, marketing and operational resources than the
Company. In addition, the Company's competitors and potential competitors
include many larger, more established companies which may have a lower cost of
funds than the Company and access to capital markets and to other funding
sources that may be unavailable to the Company.

EMPLOYEES

At June 30, 1997, the Company had 48 full-time employees, of which 12 were
engaged primarily in marketing and product origination, 15 were engaged
primarily in servicing and the remaining were engaged in various other clerical
and administrative functions. Of the total number of employees at such date, 35
were located at the Company's headquarters in Tacoma, Washington, and 13 were
located at facilities near Kansas City, Missouri. None of the Company's
employees is subject to a collective bargaining agreement, and the Company
believes that its relations with its employees are good.

PROPERTIES

Presently, the Company's corporate headquarters are located in a leased
office space of approximately 7,800 square feet at 6416 Pacific Highway East,
Tacoma, Washington. The lease is between the Company and Michael A. Price. The
lease terminates on December 31, 1997, and requires monthly rental payments of
$8,500. The Company believes that the construction of the Company's new
corporate headquarters which will be located in a leased space of approximately
25,000 square feet at the same premises, which will be completed by June 30,
1998. The lease on the new premises will also be with Michael A. Price, and the
Company expects that the lease will extend through March 2003, and that the
monthly rental payments will be approximately $28,125. The Company will continue
to lease its existing space as well as the new premises. See "Certain
Transactions -- Officers and Directors."

The Company also leases an aggregate of approximately 2,800 square feet of
space for two adjoining facilities near Kansas City, Missouri. The leases on
these facilities require aggregate monthly rental payments of $3,020 and expire
on October 31, 2001.

The Company believes that its current and new facilities will provide
adequate space for its future needs.

LEGAL PROCEEDINGS

On February 28, 1997, the Company filed a complaint in Pierce County
Superior Court in Tacoma, Washington against several parties, asserting claims
for breach of contract, fraud and negligence in a lease

40
<PAGE> 42

transaction. The Company is alleging joint and several liability and is seeking
approximately $940,000 plus interest and legal fees. See Note 7 to T&W Financial
Corporation and Affiliates Financial Statements.

In addition to the litigation noted above, the Company is, from time to
time party to various claims, lawsuits, and administrative proceedings arising
in the ordinary course of business. Although the ultimate dispositions of legal
proceedings cannot be predicted with certainty, to the best knowledge of the
Company, there is no litigation or claim threatened against the Company that is
likely to have a material adverse effect on its business, financial condition or
results of operations. See "Risk Factors -- Dependence on Creditworthiness of
Lessees and Portfolio Performance."

41
<PAGE> 43

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The name, age and position of each person who is an executive officer or
director of the Company is as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Michael A. Price 52 Chief Executive Officer and Chairman of the Board
Thomas W. Price 34 President and Director
Kenneth W. McCarthy, Jr. 56 Senior Vice President, General Counsel and Director
Paul B. Luke 41 Senior Vice President, Chief Financial Officer, Secretary,
Treasurer and Director
Kenneth L. Hatch 62 Director
David N. Syferd 52 Director
</TABLE>

Michael A. Price has served as Chief Executive Officer and Chairman of the
Board of the Company and its predecessors since its formation in 1976. Prior to
1976, Mr. Price was a Vice President of International Finance, an independent
leasing company. Mr. Price was one of the founders, and is a director, of the
United Association of Equipment Lessors ("UAEL"), a national association of
leasing companies.

Thomas W. Price is the son of Michael A. Price and has served as President
of the Company and its predecessors since 1996. Mr. Price has also served as a
director of the Company since 1991. He was Vice President, Secretary and
Treasurer of the Company from 1992 through 1995, and has been employed by the
Company since 1982. Mr. Price received his B.S. in Finance and Economics from
Central Washington University.

Kenneth W. McCarthy, Jr. was elected a director of the Company and was
appointed Senior Vice President and General Counsel in July 1996. Mr. McCarthy
is a principal with the law firm of McCarthy & Hogan, P.S. which has performed
general legal services for the Company from time to time since 1991. Mr.
McCarthy received his B.S. in Chemistry from Seattle University and his J.D.
from Gonzaga University.

Paul B. Luke joined the Company in July 1996 as Senior Vice President and
Chief Financial Officer. He was elected a director of the Company in July 1996.
From 1993 through June 1996, Mr. Luke was with the accounting firm of BDO
Seidman, LLP, where he was most recently a partner responsible for the
structured finance and equipment leasing practice group. Mr. Luke worked
extensively on assisting BDO Seidman clients in securitizations. Prior to 1993,
Mr. Luke owned an accounting firm, besides being an associate for a Washington
based accounting firm. Mr. Luke received his B.S. in Accounting and Economics
from Nebraska Wesleyan University, his J.D. from the University of Pittsburgh
and his M.B.A. from Pepperdine University.

Kenneth L. Hatch has been a director of the Company since July 1997. Since
February 1996, he has served as the President of The Pacific Institute, a
corporate consulting firm. From February 1995 through February 1996, Mr. Hatch
was a Senior Vice President of AH Belo. From 1980 through 1995, Mr. Hatch served
as Chairman, President and Chief Executive Officer of KIRO, Inc., a division of
Bonneville International Corporation. From 1980 through 1995, Mr. Hatch also had
additional responsibilities as Senior Vice President of Bonneville International
Corporation. Mr. Hatch received his B.S. in Business and Finance from the
University of Utah.

David N. Syferd has been a director of the Company since July 1997. Mr.
Syferd has been a partner in the Seattle based advertising/public relations
agency of KNCF/Dave since its formation in 1995. From 1981 through 1995, Mr.
Syferd was the chairman of Elgin Syferd/DDB Needham. Mr. Syferd received his
B.S. in Political Science in 1967 from Whitworth College.

COMPENSATION OF DIRECTORS

Prior to the Offering, members of the Board of Directors of the Company
have not received compensation for their services as directors. Following the
closing of this Offering, each director who is not an officer will

42
<PAGE> 44

receive a quarterly fee of $750 and an additional fee of $250 for each meeting
of the Board or committee attended other than regular quarterly meetings of the
Board and an annual meeting of each committee. Each director who is not an
officer will also receive 50 shares of Common Stock for attendance at each
meeting of the Board pursuant to the Company's 1997 Director Stock Grant Plan.
The Company will continue to reimburse all directors for all travel-related
expenses incurred in connection with their activities as directors. See
"-- Benefit Plans."

BOARD COMMITTEES

In connection with the Offering, the Company is forming two new committees
of the Board, the Audit Committee and the Compensation Committee. The members of
the Company's Audit Committee will be Messrs. Hatch, Syferd and Luke. The Audit
Committee's functions will include reviewing the Company's internal accounting
procedures and consulting with and reviewing the services provided by the
Company's independent auditors. The members of the Company's Compensation
Committee will be Messrs. Hatch, Syferd and Michael A. Price. The Compensation
Committee will review and recommend to the Board the compensation and benefits
to be provided to the Company's officers and key employees and review general
policy matters relating to employee compensation and benefits. During 1996, all
compensation for the Company was determined by Michael A. Price, the Company's
Chief Executive Officer, and Thomas W. Price, the Company's President, because
the Company had not yet established a Compensation Committee.

BENEFIT PLANS

1997 STOCK OPTION PLAN. The Company's 1997 Stock Option Plan (the "1997
Stock Option Plan") was adopted by the Board of Directors and approved by the
shareholders on July 22, 1997. The 1997 Stock Option Plan is designed as a means
to retain and motivate employees, directors and consultants. A total of
1,000,000 shares of Common Stock has been reserved for issuance under the 1997
Stock Option Plan. The 1997 Stock Option Plan provides for grants of incentive
stock options to employees and nonstatutory stock options to employees,
officers, directors and consultants of the Company. The 1997 Stock Option Plan
will be administered by the Board of Directors or by a committee appointed by
the Board, which will select optionees and determine the terms of options
granted, including the exercise price, the number of shares subject to the
option and the vesting provisions thereof. The terms of incentive stock options
granted under the 1997 Stock Option Plan generally may not exceed ten years.

As of the date of this Prospectus no options are outstanding under the 1997
Stock Option Plan. In connection with the Company's acquisition of Commercial
Capital, the Company entered into employment agreements with two principals of
Commercial Capital, James R. Neese and Larry E. Rice. The employment agreements
provide that upon completion of the Offering, the Company shall grant to each of
Messrs. Neese and Rice an option to purchase 22,000 shares of Common Stock at an
exercise price per share equal to the initial public offering price. Such
options will be issued under the 1997 Stock Option Plan and will vest ratably
over a five year period.

1997 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1997 Employee Stock
Purchase Plan (the "1997 Stock Purchase Plan") was adopted by the Board of
Directors and approved by the shareholders on July 22, 1997. A total of 100,000
shares of Common Stock has been reserved for issuance under the 1997 Stock
Purchase Plan. The 1997 Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, is administered by
the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors of the Company) are eligible to
participate if they have been employed for more than six months in any calendar
year and are customarily employed for at least 20 hours per week. The 1997 Stock
Purchase Plan will become effective after the closing of the Offering. No
employee is eligible to participate if that employee owns, or after a proposed
purchase under the 1997 Stock Purchase Plan would own, five percent more of the
voting stock of the Company. The 1997 Stock Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions. The purchase
price of the Common Stock under the 1997 Stock Purchase Plan will be equal to
85% of the fair market value per share of Common Stock.

43
<PAGE> 45

1997 DIRECTOR STOCK GRANT PLAN. The Company's 1997 Director Stock Grant
Plan was adopted by the Board of Directors and approved by the shareholders on
July 22, 1997. A total of 10,000 shares of Common Stock has been reserved for
issuance under the 1997 Director Stock Grant Plan. Under the 1997 Director Stock
Grant Plan, each individual who is a director of the Company who has not been an
officer of the Company during the preceding 12 months shall be awarded 50 shares
of Common Stock for attendance at each annual, quarterly or special meeting of
the Board. The 1997 Director Stock Grant Plan is administered by the Board of
Directors.

EXECUTIVE COMPENSATION

The following table sets forth all information regarding the annual
compensation during fiscal year 1996 for the Company's Chief Executive Officer
and those officers of the Company who received compensation in excess of
$100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
------------------------------- NUMBER OF SHARES
NAME AND ALL OTHER UNDERLYING
PRINCIPAL POSITION SALARY COMPENSATION(2)(3) OPTIONS
- ----------------------------------------------- -------- ------------------ ----------------
<S> <C> <C> <C>
Michael A. Price............................... $141,750 $666,432 --
Chairman of the Board and Chief Executive
Officer
Thomas W. Price................................ $481,000 $207,000 --
President
Kenneth W. McCarthy, Jr.(1).................... $77,940 $82,500 147,900
Senior Vice President and General Counsel
Paul B. Luke (1)............................... $77,940 $82,500 147,900
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
</TABLE>

- ---------------

(1) Employment commenced July 1, 1996.

(2) Includes management and consulting fees paid to PLM, the members of which
are Michael A. Price, Thomas W. Price, Kenneth W. McCarthy, Jr. and Paul B.
Luke. See "Certain Transactions -- P.L.M. Consulting Group, L.L.C." Includes
lease origination related commissions of $438,432 to Michael A. Price.

(3) Does not include distributions from pass-through entities.

STOCK OPTIONS. In July 1997, Paul B. Luke and Kenneth W. McCarthy, Jr. each
exercised options for 147,900 shares of the Common Stock of the Company. Messrs.
Luke and McCarthy each paid for the exercise price of such options with a
promissory note payable to the Company. As of August 1, 1997, the aggregate
amount outstanding for each of Messrs. Luke and McCarthy, under their respective
promissory notes was $581,079 with interest at 8% payable annually. All of the
unpaid interest and principal under the promissory notes will be paid in full
upon the closing of the Offering with proceeds received from the sale of shares
of Common Stock individually offered by Messrs. Luke and McCarthy. Such options
were granted in July 1996 at an exercise price equal to the fair market value of
the Common Stock. See Notes 6 and 9 to the T&W Financial Corporation and
Affiliates Financial Statements.

44
<PAGE> 46

CERTAIN TRANSACTIONS

T&W FUNDING COMPANY VI, L.L.C.

Michael A. Price, Thomas W. Price and PLM own all of the membership
interests of T&W Funding Company VI, L.L.C. ("Funding VI"). As a result of the
Restructuring, T&W Financial Corporation will own an 85% membership interest in
T&W Financial Services Company L.L.C., (the "LLC") and Funding Company VI will
own the remaining 15% membership interest in the LLC. Profits and losses of the
LLC will be allocated to T&W Financial Corporation and Funding Company VI in
accordance with their respective ownership of the LLC; however, 99% of the
deductions or losses associated with secured lines of credit or other recourse
liabilities of the LLC will be allocated to Funding Company VI, whose principals
will guarantee such liabilities. See "Risk Factors -- Potential Conflicts of
Interest Between the Company and Certain Affiliates" and "The Restructuring."

P.L.M. CONSULTING GROUP, L.L.C.

Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy,
Jr. own all of the membership interests of P.L.M. Consulting Group, L.L.C.
("PLM"). PLM provides consulting services to, and holds certain investments in,
other companies, including companies in the specialized commercial finance
industry. The Company and PLM are parties to a management services arrangement,
which commenced in July 1996, pursuant to which PLM provides management,
accounting, financial and other advisory services to the Company. The amounts
paid by the Company to PLM under such arrangement were $600,000 for the six
months ended June 30, 1997 and $600,000 for the year ended December 31, 1996,
respectively. Such arrangement will be terminated upon the closing of the
Offering. See "Management -- Executive Compensation."

T&W Financial Corporation has entered into an agreement with PLM pursuant
to which PLM will provide the Company with the services of Michael A. Price,
Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy, Jr. to act as executive
officers of T&W Financial Corporation. Under the agreement, PLM is entitled to
an annual base fee of $1,440,000 and an annual bonus equal to 35% of T&W
Financial Corporation's annual audited after tax return on equity in excess of
20%, with proportionate reductions in the event that any of such individuals
ceases to be an executive officer of T&W Financial Corporation. Messrs. M.
Price, T. Price, McCarthy and Luke will each devote approximately 90% of their
time to the Company's business. The agreement will become effective upon the
closing of the Offering. See "Management -- Executive Compensation." The amounts
paid by the Company to PLM would have been approximately $797,000 and $384,000
for the years ended December 31, 1996 and 1995, respectively.

The Company and PLM are parties to a credit arrangement pursuant to which,
PLM borrows amounts from time to time from third party lenders and advances such
amounts to the Company at the same rate and on the same terms and conditions
offered to PLM by its lenders. As of June 30, 1997, the outstanding principal
balance and accrued interest under such arrangement was $1.65 million. The
Company intends to use a portion of the net proceeds of the sale of shares of
Common Stock by the Company in the Offering to repay all amounts outstanding
under such arrangement and such arrangement will be terminated upon the closing
of the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

PLM owns substantially all of the membership interests of Bonney Lake
Supermarket, LLC ("Bonney Lake"). Bonney Lake owns and operates an independent
grocery store located in the Seattle area. The Company and Bonney Lake are
parties to three lease agreements pursuant to which the Company leases certain
equipment to Bonney Lake on standard market terms. The first lease was entered
into in December 1996 with monthly lease payments of $4,000 for the first year,
$8,000 for the second year, $11,000 for the third year, $15,000 for the fourth
year and $19,000 for the fifth year. The second lease was entered into in
February 1997 with monthly lease payments of $6,500 over a five year term. The
third lease was entered into in May 1997 with monthly lease payments of $2,000
over a seven year term. See "Risk Factors -- Potential Conflicts of Interest
Between the Company and Certain Affiliates."

45
<PAGE> 47

PLM is the beneficial owner of 25% of the membership interests of Universal
Metering L.L.C. ("Universal Metering"). Universal Metering was created for the
purpose of selling water meter installation, reading and maintenance services to
residential and commercial properties. The Company and Universal Metering are
parties to a letter of intent pursuant to which the Company and Universal
Metering would enter into an agreement under which the Company would lease
certain water meter equipment to the owners or operators of such properties on
standard market terms. The Company has approved six leases with lease payments
aggregating approximately $800,000. To date, none of such leases has been
funded. See "Risk Factors -- Potential Conflicts of Interest Between the Company
and Certain Affiliates."

OFFICERS AND DIRECTORS

Michael A. Price and Thomas W. Price own 40% of the membership interests of
NW, L.L.C. ("NW LLC"). NW LLC provides consulting and financial services to
small and medium-sized businesses in the commercial mortgage industry. The
Company and NW LLC are parties to four lease agreements pursuant to which the
Company leases certain computer and office equipment to NW LLC on standard
market terms. The first lease was entered into in January 1996 with monthly
lease payments of $5,683 over a five year term. The second and third leases were
entered into in February 1996 with monthly lease payments of $524 and $1,378,
respectively, over five year terms. The fourth lease was entered into in March
1996 with monthly lease payments of $830 over a five year term. See "Risk
Factors -- Potential Conflicts of Interest Between the Company and Certain
Affiliates."

The Company and Michael A. Price are parties to a lease agreement pursuant
to which the Company leases its current headquarters and related property from
Mr. Price on standard market terms. The lease was entered into in December 1991
with current monthly rental payments of $8,500 per month and expires on December
31, 1997. The Company intends to enter into a new lease agreement with Mr.
Michael Price for its existing facilities. The amounts paid by the Company to
Mr. Price under the lease were $51,000 for the six months ended June 30, 1997,
and $60,000, $49,000 and $36,000 for the years ended December 31, 1996, 1995 and
1994, respectively. See "Business -- Properties."

The Company intends to enter into a lease agreement with Mr. Price pursuant
to which the Company would lease its new headquarters on the same premises from
Mr. Price on standard market terms. The Company anticipates that the lease will
commence in April 1998 and will run through March 2003 with monthly rental
payments of approximately $28,125. See "Business -- Properties."

Kenneth L. Hatch, a director of the Company, is the President of The
Pacific Institute. The Pacific Institute provides management consulting services
to businesses. In July 1997, the Company engaged The Pacific Institute to
provide certain employee continuity consulting to the Company for a total fee of
$81,820. See "Management -- Directors and Executive Officers."

David N. Syferd, a director of the Company, is a partner of KNCF/Dave.
KNCF/Dave provides public relations services to businesses. In July 1997, the
Company engaged KNCF/Dave to provide certain public relations consulting to the
Company for a total fee of $37,000. See "Management -- Directors and Executive
Officers."

CERTAIN RELATIONSHIPS TERMINATING AT CLOSING

In July 1997, Paul B. Luke and Kenneth W. McCarthy, Jr. each exercised
options for 147,900 shares of the Common Stock of the Company. Messrs. Luke and
McCarthy each paid for the exercise price of such options with a promissory note
payable to the Company. As of August 1, 1997, the aggregate amount outstanding
for each of Messrs. Luke and McCarthy under their respective promissory notes
was $581,079 with interest at 8% payable annually. All of the unpaid interest
and principal under the promissory notes will be paid in full upon the closing
of the Offering with proceeds received from the sale of shares of Common Stock
individually offered by Messrs. Luke and McCarthy. "See Principal and Selling
Shareholders."

In August 1997, the Company will loan Right Price Recreation, which is
principally owned by Thomas W. Price, an aggregate amount of $400,000 with
interest at 8% payable annually, which amount, including

46
<PAGE> 48

accrued interest, will be paid in full upon the closing of the Offering with
proceeds received from the sale of shares of Common Stock offered by Thomas W.
Price.

The Company entered into two lease agreements with R.P.R. Company, L.L.C.
("RPR"), which is principally owned by Thomas W. Price, for an airplane and
related equipment leased by the Company to RPR. The first lease was entered into
in September 1995 with monthly lease payments of $11,584 over a five year term.
The second lease was entered into in May 1997 with monthly lease payments of
$3,423 per month over a five year term. As of August 1, 1997, the balance of the
remaining lease payments was $671,872. The balance of the remaining lease
payments will be paid in full upon the closing of the Offering with proceeds
received from the sale of shares of Common Stock offered by Thomas W. Price and
such leases will be terminated.

The Company entered into six lease agreements with Waterhouse Charters,
which is principally owned by Michael A. Price for a boat and related equipment
leased by the Company to Waterhouse Charters. The first lease was entered into
in December 1993 with monthly lease payments of $3,515 over a five year term.
The second lease was entered into in August 1994 with monthly lease payments of
$1,110 over a three year term. The third lease was entered into in February 1995
with monthly lease payments of $1,424 over a three year term. The fourth lease
was entered into in August 1995 with monthly lease payments of $3,049 over a
three year term. The fifth lease was entered into in May 1996 with monthly lease
payments of $13,860 over a five year term. The sixth lease was entered into in
March 1997 with monthly lease payments of $3,525 over a five year term. As of
August 1, 1997, the balance of the remaining lease payments was $951,278. The
balance of the remaining lease payments will be paid in full upon the closing of
the Offering with proceeds received from the sale of shares of Common Stock
offered by Michael A. Price and such leases will be terminated.

The Company entered into two transactions with AST Leasing, which is
principally owned by Michael A. Price for certain personal property primarily
consisting of furniture, fixtures and other related equipment leased by the
Company to AST Leasing. The first lease was entered into in October 1995 with
monthly lease payments of $18,514 over a five year term. The second lease was
entered into in September 1996 with monthly lease payments of $24,620 over a two
year term. As of August 1, 1997, the balance of the remaining lease payments was
$1,085,250. The balance of the remaining lease payments will be paid in full
upon the closing of the Offering with proceeds received from the sale of shares
of Common Stock offered by Michael A. Price and such leases will be terminated.

See "Risk Factors -- Potential Conflicts of Interest Between the Company
and Certain Affiliates," "The Restructuring" and Note 5 to the T&W Financial
Corporation and Affiliates Financial Statements.

47
<PAGE> 49

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the effective date hereof, and as adjusted
to reflect the sale of shares of Common Stock in the Offering for: (i) each
person known to T&W Financial Corporation to be the beneficial owner of more
than 5% of the outstanding Common Stock; (ii) each director and executive
officer of the T&W Financial Corporation; (iii) all directors and executive
officers of the T&W Financial Corporation as a group; and (iv) each Selling
Shareholder. Except as otherwise noted, the named beneficial owner has sole
voting and investment power.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BENEFICIAL OWNERS, DIRECTORS, PRIOR TO OFFERING(2) AFTER OFFERING(3)
EXECUTIVE OFFICERS ------------------------ SHARES TO ------------------------
AND SELLING SHAREHOLDERS(1) NUMBER PERCENTAGE BE SOLD NUMBER PERCENTAGE
- ------------------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Michael A. Price(4)................. 4,915,251 84.75% 166,000 4,749,251 59.36%
Thomas W. Price(5).................. 588,949 10.15% 80,000 508,949 6.36%
Paul B. Luke........................ 147,900 2.55% 57,000 90,900 1.14%
Kenneth W. McCarthy, Jr............. 147,900 2.55% 57,000 90,900 1.14%
Kenneth L. Hatch.................... -- -- -- -- --
David N. Syferd..................... -- -- -- -- --
--------- ----- ------- --------- -----
All directors and executive officers
as a group (6 persons)............ 5,800,000 100.00% 360,000 5,440,000 68.00%
========= ===== ======= ========= =====
</TABLE>

- ---------------

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to the community
property laws, where applicable. The address of each beneficial owner is c/o
T&W Financial Corporation, 6416 Pacific Highway East, Tacoma, Washington
98424.

(2) Based on an aggregate of 5,800,000 shares of Common Stock outstanding as of
the date hereof.

(3) Based on an aggregate of 8,000,000 shares of Common Stock to be outstanding
upon the closing of the Offering.

(4) Includes 2,374,626 shares of Common Stock owned by the Michael A. Price
Guarantor Retained Annuity Trust, dated August 1, 1997, and 2,374,625 shares
of Common Stock as Trustee of the Katherine M. Price Guarantor Retained
Annuity Trust, dated August 1, 1997.

(5) Includes 148,613 shares of Common Stock owned by Thomas W. Price through a
limited liability company.

48
<PAGE> 50

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock and certain
provisions of the Articles and Bylaws of the Company are summaries which do not
purport to be complete, and are subject to and qualified in their entirety by
reference to the Articles and Bylaws, forms of which are filed as exhibits to
the Registration Statement of which this Prospectus is a part. Reference is made
to such exhibits for a detailed description of the provisions summarized below.
As used in this section the term "Company" shall refer to T&W Financial
Corporation.

The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock").

On the date of this Prospectus, there were 5,800,000 shares of Common Stock
and no shares of Preferred Stock issued and outstanding. Upon the closing of the
Offering, there will be 8,000,000 shares of Common Stock and no shares of
Preferred Stock issued and outstanding.

COMMON STOCK. Holders of Common Stock are entitled to one vote per share on
all matters to be voted on by the shareholders. There are no cumulative voting
rights. Accordingly, the holders of a majority of the shares of Common Stock
voting for the election of directors can elect all the directors if they choose
to do so. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of the liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities. Holders of Common Stock have no preemptive rights
and the Common Stock is neither redeemable nor convertible into any other
securities. As of July 3, 1997, there were four record holders of the Common
Stock, Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W. McCarthy,
Jr. The right of holders of the Common Stock to elect all of the Company's
directors, to receive dividends and to share ratably in assets upon a
liquidation of the Company may be subject to the rights of holders of shares of
Preferred Stock, if any such shares are issued.

PREFERRED STOCK. Pursuant to the Articles, the Company is authorized to
issue "blank check" Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the shareholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, among other
things, could adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium to the prevailing market price or otherwise adversely affect the market
price of the Common Stock. Currently, the Company has no plans to issue shares
of Preferred Stock.

ANTITAKEOVER RESTRICTIONS

STATUTORY PROVISIONS. Washington law contains certain provisions that may
have the effect of delaying, deterring or preventing a change in control of the
Company. Chapter 23B.19 of the Washington Business Corporation Act (the "WBCA")
prohibits the Company, with certain exceptions, from engaging in certain
significant business transactions with a person or group of persons who acquire
10% or more of the Company's voting securities without the prior approval of the
Company's Board of Directors (an "Acquiring Person") for a period of five years
after such acquisition. Chapter 23B.19 applies to domestic public corporations,
domestic corporations electing to be governed by Chapter 23B.19, and to foreign
corporations in certain limited circumstances. The prohibited transactions
include, among others, a merger with, disposition of assets to, or issuance or
redemption of stock to or from, the Acquiring Person, or otherwise allowing the
Acquiring Person to receive any disproportionate benefit as a shareholder. The
Company may not exempt itself from coverage of this statute. These statutory
provisions may have the effect of delaying, deterring or preventing a change in
control of the Company.

49
<PAGE> 51

ARTICLE PROVISIONS. Under the Company's Articles, the Board of Directors
has the authority to issue up to 10,000,000 shares of Preferred Stock with such
rights and preferences as the Board of Directors may determine. The issuance of
such shares may have the effect of delaying, deterring or preventing a change in
control of the Company. See "-- Preferred Stock."

LIMITATION OF LIABILITY AND INDEMNIFICATION

Article 5 of the Articles limits to the fullest extent permitted by
Washington law, the personal liability of directors of the Company for monetary
damages for certain conduct as a director. The Articles and the Section
23B.08.320 of the WBCA do not permit limitations on a director's liability in
circumstances involving intentional misconduct or a knowing violation of law,
illegal corporate distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article 6 of the Articles provides that the
Company shall, to the full extent permitted by Washington law, indemnify and
advance or reimburse the reasonable expenses incurred by any person made a party
to a proceeding because that person is or was a director of the Company. In
addition, Article VIII of the Bylaws permits the Company's Board of Directors to
indemnify the Company's officers, employees and agents to the fullest extent
permitted by Washington law.

The Company plans to enter indemnification agreements with its directors.
The Company intends to secure insurance on behalf of its executive officers and
directors for certain liabilities arising out of their actions in such
capacities.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is TranSecurities
International, Inc.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 8,000,000 shares of
Common stock outstanding. The 2,560,000 shares of Common Stock offered hereby
will be freely tradable without restriction or further registration under the
Securities Act, except for shares purchased by persons deemed to be "affiliates"
of the Company or acting as "underwriters," as those terms are defined in the
Securities Act. The remaining 5,440,000 shares will be Restricted Securities.
Following the expiration of the lock-up period described below, all of the
remaining outstanding shares of Common Stock may only be sold in the public
market if such shares are registered under the Securities Act or sold in
accordance with Rule 144 promulgated under the Securities Act.

In general, under Rule 144, a person (or persons whose shares are required
to be aggregated) who has beneficially owned, for at least one year, shares of
Common Stock that have not been registered under the Securities Act or that were
acquired from an "affiliate" of the Company is entitled to sell within any
three-month period the number of shares of Common Stock which does not exceed
the greater of one percent of the number of the then outstanding shares of the
Company's Common Stock or the average weekly reported trading volume during the
four calendar weeks preceding the sale. Sales under Rule 144 are also subject to
certain notice requirements and to the availability of current public
information about the Company and must be made in unsolicited brokers'
transactions or to a market maker. A person (or persons whose shares are
required to be aggregated) who was not an "affiliate" of the Company under the
Securities Act during the three months preceding a sale and who has beneficially
owned such shares for at least two years is entitled to sell such shares under
Rule 144 without regard to the volume, notice, information and manner of sale
provisions of Rule 144.

An aggregate of 1,000,000 shares of Common Stock are reserved for issuance
to directors, officers, consultants and employees of the Company pursuant to the
1997 Stock Option Plan. An aggregate of 100,000 shares of Common Stock are
reserved for issuance to certain employees of the Company pursuant to the 1997
Stock Purchase Plan. An aggregate of 10,000 shares of Common Stock are reserved
for issuance to the directors who are not officers of the Company pursuant to
the 1997 Director Stock Grant Plan. See

50
<PAGE> 52

"Management -- Benefit Plans." The Company intends to file a registration
statement on Form S-8 covering the issuance of shares of plans. Accordingly,
shares issued pursuant to these plans will be freely tradable, except for any
shares held by an "affiliate" of the Company.

The Company, its executive officers and directors and certain shareholders
of the Company, have agreed not to sell, offer to sell, contract to sell, pledge
or otherwise dispose of or transfer, directly or indirectly, any shares of
Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any rights to purchase or acquire, shares of Common Stock for a period
of 180 days commencing on the date of this Prospectus without the prior written
consent of Oppenheimer & Co., Inc., other than the sale of the shares of Common
Stock in the Offering and the issuance by the Company of: (i) options to
purchase shares of Common Stock (and shares of Common Stock issuable upon the
exercise of such options) in connection with the 1997 Stock Option Plan; (ii)
shares of Common Stock in connection with the 1997 Employee Stock Purchase Plan;
(iii) shares of Common Stock in connection with the 1997 Director Stock Grant
Plan; and (iv) 13,700 shares of Common Stock to be awarded to certain employees
of the Company. See "Underwriting."

Prior to the Offering, there has been no public trading market for the
Common Stock. No predictions can be made of the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
significant amounts of Common Stock could adversely affect the prevailing market
price of the Common Stock, as well as impair the ability of the Company to raise
capital through the issuance of additional equity securities.

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<PAGE> 53

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company, the Selling Shareholders and the underwriters named below
(the "Underwriters"), for whom Oppenheimer & Co., Inc. and Prudential Securities
Incorporated are acting as representatives (the "Representatives"), each of the
Underwriters has severally agreed to purchase from the Company and the Selling
Shareholders and the Company, and the Selling Shareholders have agreed to sell
to the Underwriters, the respective numbers of shares of Common Stock set forth
opposite their names below:

<TABLE>
<CAPTION>
NAME
-------------------------------------------------------------------------
<S> <C>
Oppenheimer & Co., Inc. .................................................
Prudential Securities Incorporated.......................................
Total..........................................................
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The Underwriters are committed to
purchase and pay for all of the above shares of Common Stock if any are
purchased.

The Underwriters have advised the Company that the Underwriters propose to
offer the shares of Common Stock directly to the public at the offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Common Stock. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share of Common Stock on sales to certain other dealers.
After the initial public offering of the shares, the public offering price,
concession and re-allowance to dealers may be changed by the Underwriters.

Prior to the Offering, there has been no public trading market for the
Common Stock. Although the Common Stock has been approved for quotation on
Nasdaq, there can be no assurance that any active trading market will develop
for the Common Stock or, if developed, will be maintained. The initial public
offering price was determined through negotiations among the Company and the
Representatives. The factors considered in determining the initial public
offering price included the history of and the prospects for the industry in
which the Company competes, the ability of the Company's management, the past
and present operations of the Company, the historical results of operations of
the Company, the prospects for future earnings of the Company, the general
condition of the securities markets at the time of the Offering and the recent
market prices of securities of generally comparable companies.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Company has granted the Underwriters an option exercisable during the
30-day period after the date of this Prospectus to purchase up to 384,000
additional shares of Common Stock, solely to cover over-allotments, if any, at
the public offering price less the underwriting discount, as set forth on the
cover page of this Prospectus. If the Underwriters exercise such over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof as the number of shares of
Common Stock offered hereby. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the shares of Common
Stock offered hereby.

The Representatives have informed the Company that the Underwriters will
not confirm, without customer authorization, sales to their customer accounts as
to which they have discretionary trading power.

52
<PAGE> 54

The Company, its executive officers and directors and certain shareholders
of the Company, have agreed not to sell, offer to sell, contract to sell, pledge
or otherwise dispose of or transfer, directly or indirectly, any shares of
Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any rights to purchase or acquire, shares of Common Stock for a period
of 180 days commencing on the date of this Prospectus without the prior written
consent of Oppenheimer & Co., Inc., other than the sale of the shares of Common
Stock in the Offering and the issuance by the Company of: (i) options to
purchase shares of Common Stock (and shares of Common Stock issuable upon the
exercise of such options) in connection with the 1997 Stock Option Plan; (ii)
shares of Common Stock in connection with the 1997 Purchase Plan; (iii) shares
of Common Stock in connection with the 1997 Director Stock Grant Plan and (iv)
13,700 Shares of Common Sock to be awarded to certain employees of the Company.

The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Graham & James LLP, San Francisco,
California. Certain legal matters relating to the Common Stock offered hereby
will be passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, San
Francisco, California.

EXPERTS

The combined financial statements of T&W Financial Corporation and
Affiliates included in this Prospectus have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the periods
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.

53
<PAGE> 55

T&W FINANCIAL CORPORATION AND AFFILIATES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Combined Balance Sheets as of December 31, 1995 and 1996 and (Unaudited) June 30,
1997................................................................................ F-3
Combined Statements of Income for the years ended December 31, 1994, 1995 and 1996 and
(Unaudited) the Six Months Ended June 30, 1996 and 1997............................. F-4
Combined Statement of Shareholders' Equity for the years ended December 31, 1994, 1995
and 1996 and (Unaudited) the Six Months Ended June 30, 1997......................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1994, 1995, 1996
and (Unaudited) the Six Months Ended June 30, 1996 and 1997......................... F-6
Notes to Combined Financial Statements................................................ F-7
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
T&W Financial Corporation and Affiliates

We have audited the accompanying combined balance sheets of T&W Financial
Corporation and Affiliates (the "Company") as of December 31, 1995 and 1996, and
the related combined statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used, and significant estimates made, by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of T&W
Financial Corporation and Affiliates at December 31, 1995 and 1996, and the
combined results of their operations and cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

BDO SEIDMAN, LLP

Seattle, Washington
March 7, 1997

F-2
<PAGE> 57

T&W FINANCIAL CORPORATION AND AFFILIATES

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
------------------- --------------------------
1995 1996 ACTUAL PRO FORMA
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents........................ $ 4,323 $ 8,064 $ 8,861 $ 8,861
Net Investment in Leases (Notes 2, 3 and 4)...... 90,359 135,087 103,890 103,890
Securitization Receivable (Note 9)............... -- -- 6,750 6,750
Intangible Assets, net........................... -- -- 2,190 2,190
Other Assets..................................... 1,369 1,286 2,489 2,489
------- -------- -------- --------
Total Assets........................... $96,051 $144,437 $ 124,180 $ 124,180
======= ======== ======== ========

Accounts Payable and Other Accrued Liabilities... $ 5,056 $ 5,634 $ 6,111 $ 6,111
Notes Payable -- Recourse (Note 3)............... 8,833 32,272 17,659 17,659
Notes Payable -- Nonrecourse (Note 4)............ 67,686 89,975 80,804 80,804
Security Deposits................................ 4,926 6,259 7,442 7,442
Pro Forma Deferred Income Tax Liabilities (Note
9)............................................. -- -- -- 3,500
------- -------- -------- --------
Total Liabilities...................... 86,501 134,140 112,016 115,516
------- -------- -------- --------
Pro Forma Minority Interest (Note 9)............. -- -- -- 1,825
------- -------- -------- --------
Commitments and Contingencies (Notes 7 and 9)
Shareholders' Equity:
Common stock and paid-in capital............... 3,438 3,438 3,438 3,438
Retained earnings.............................. 6,112 6,859 8,726 3,401
------- -------- -------- --------
Total Shareholders' Equity............. 9,550 10,297 12,164 6,839
------- -------- -------- --------
Total Liabilities and Shareholders'
Equity............................... $96,051 $144,437 $ 124,180 $ 124,180
======= ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 58

T&W FINANCIAL CORPORATION AND AFFILIATES

COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
1994 1995 1996 1996 1997
------ ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Lease contract revenue...................... $7,132 $10,621 $16,834 $ 6,944 $ 7,298
Gain on sale of leases...................... -- -- -- -- 3,448
Fee income.................................. 607 1,364 2,067 1,099 134
Servicing and other income.................. 292 555 595 517 738
------ ------- ------- ------ -------
Total Revenues...................... 8,031 12,540 19,496 8,560 11,618
------ ------- ------- ------ -------
Expenses:
Interest expense............................ 2,589 4,513 6,434 2,911 3,726
Compensation and related expenses........... 1,484 1,796 2,859 1,305 1,986
Amortization of initial direct costs........ 848 1,302 1,893 854 1,222
Provision for credit losses................. 223 621 1,137 345 402
Other general and administrative expenses... 601 807 1,345 757 1,073
------ ------- ------- ------ -------
Total Expenses...................... 5,745 9,039 13,668 6,172 8,409
------ ------- ------- ------ -------
Net Income.................................... $2,286 $ 3,501 $ 5,828 $ 2,388 $ 3,209
====== ======= ======= ====== =======
PRO FORMA AMOUNTS (UNAUDITED) (NOTE 9):
Income before minority interest and income
taxes.................................... $ 5,828 $ 3,209
Minority interest........................... (874) (481)
------- -------
Income before income taxes.................. 4,954 2,728
Provision for income taxes.................. (1,783) (982)
------- -------
Net income.................................. $ 3,171 $ 1,746
======= =======
Net income per share........................ $ 0.55 $ 0.30
Weighted average number of shares of Common
Stock and Common Stock Equivalents
Outstanding.............................. 5,800 5,800
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 59

T&W FINANCIAL CORPORATION AND AFFILIATES

COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
AND PAID IN RETAINED
CAPITAL EARNINGS TOTAL
------------ --------- -------
<S> <C> <C> <C>
Balance, January 1, 1994.................................. $2,888 $ 2,205 $ 5,093
Net income.............................................. -- 2,286 2,286
Capital contributions................................... 208 -- 208
Distributions to shareholders........................... -- (120) (120)
------ -------- -------
Balance, December 31, 1994................................ 3,096 4,371 7,467
Net income.............................................. -- 3,501 3,501
Capital contributions................................... 342 -- 342
Distributions to shareholders........................... -- (1,760) (1,760)
------ -------- -------
Balance, December 31, 1995................................ 3,438 6,112 9,550
Net income.............................................. -- 5,828 5,828
Distributions to shareholders........................... -- (5,081) (5,081)
------ -------- -------
Balance, December 31, 1996................................ 3,438 6,859 10,297
Net income (Unaudited).................................. -- 3,209 3,209
Distributions to shareholders (Unaudited)............... -- (1,342) (1,342)
------ -------- -------
Balance, June 30, 1997 (Unaudited)........................ $3,438 $ 8,726 $12,164
====== ======== =======
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 60

T&W FINANCIAL CORPORATION AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- --------------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Income............................... $ 2,286 $ 3,501 $ 5,828 $ 2,388 $ 3,209
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Amortization........................... 1,074 1,676 2,108 512 1,352
Provision for credit losses............ 223 621 1,137 345 402
Gain on sale of leases................. -- -- -- -- (3,448)
Changes in assets and liabilities,
exclusive of the effects of business
combinations:
Increase (decrease) in accounts payable
and other accrued liabilities....... 1,885 171 1,631 (1,083) (1,666)
Other.................................. 202 -- -- -- (20)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Operating
Activities............................. 5,670 5,969 10,704 2,162 (171)
------- ------- ------- ------- -------
Cash Flows From Investing Activities:
New leases originated.................. (34,700) (53,767) (82,066) (32,032) (45,243)
Lease payments received................ 13,390 21,026 36,575 14,324 24,072
Initial direct costs incurred.......... (1,285) (1,776) (4,324) (759) (1,376)
Increase in other assets............... -- (659) -- (102) (329)
Proceeds from sale of lease
portfolio........................... -- -- -- -- 54,213
Cash received in acquisition net of
cash paid........................... -- -- -- -- 191
------- ------- ------- ------- -------
Net Cash (Used) Provided by Investing
Activities............................. (22,595) (35,176) (49,815) (18,569) 31,528
------- ------- ------- ------- -------
Cash Flows From Financing Activities:
Proceeds from recourse and nonrecourse
borrowings.......................... 65,300 107,941 76,098 28,541 24,332
Payments on recourse and nonrecourse
borrowings.......................... (46,944) (78,916) (30,368) (11,510) (54,440)
Net increase in security deposits...... 1,315 1,950 1,333 823 1,182
Debt issue costs paid.................. (310) (431) (90) (80) (294)
(Increase) decrease in advances to
related party....................... (601) 601 -- -- --
Distributions to shareholders.......... (120) (1,760) (4,121) (544) (1,340)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Financing
Activities.......................... 18,640 29,385 42,852 17,230 (30,560)
------- ------- ------- ------- -------
Net Increase in Cash and Cash
Equivalents............................ 1,715 178 3,741 823 797
Cash and Cash Equivalents, beginning of
period................................. 2,430 4,145 4,323 4,323 8,064
------- ------- ------- ------- -------
Cash and Cash Equivalents, end of
period................................. $ 4,145 $ 4,323 $ 8,064 $ 5,146 $ 8,861
======= ======= ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 61

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

T&W Financial Corporation and special purpose entities ("SPE's), T&W
Finance Corporation I through III ("Corp I", "Corp II," and "Corp III") and T&W
Funding Company IV through VI, LLC ("LLC IV," "LLC V" and "LLC VI") (together,
the "Company" or "Companies" and individually, the "Affiliates"), are affiliated
companies, each having primarily the same two individual owners. The Company's
business operations consist primarily of writing leases on various types of
capital equipment for commercial entities. The Company's operations extend
throughout the United States, with no significant concentration in any region
except the Pacific Northwest. The Company's headquarters are located in Tacoma,
Washington.

As described more fully in Note 9, in June 1997, the Company acquired
certain assets and liabilities of Commercial Capital Corporation ("Commercial
Capital"), an equipment leasing business located near Kansas City. The
accompanying unaudited June 30, 1997 balance sheet includes assets and
liabilities of Commercial Capital and the accompanying unaudited statements of
income and cash flows for the six months ended June 30, 1997 includes operating
results relating to Commercial Capital for the period since its acquisition.

Principles of Combination -- These combined financial statements include
the accounts of the Affiliates. Interaffiliate transactions and accounts are
eliminated in combination in a manner similar to that followed in preparing
consolidated financial statements.

Income Taxes -- The Company, with the consent of its shareholders, has
elected for the shareholders to be taxed on their proportionate share of the
Companies' taxable income. Therefore, no provision or liability for federal
income taxes has been included in the financial statements. The leases are
considered "true" or operating leases for federal income tax purposes and
therefore, the Companies' income for tax purposes could be materially different
from the Companies' income for financial statement purposes. As a result of
accounting for leases as (i) direct financing for financial reporting purposes
and as "true" leases for tax purposes, and (ii) sales transactions for financial
reporting purposes versus borrowing transactions for tax purposes, the tax basis
in company assets is approximately $10.5 million less than the recorded
financial reporting basis at December 31, 1996.

Lease Accounting -- All of the Company's leases are accounted for as direct
financing leases. Under this accounting method, net present value of future
minimum lease rentals and estimated residual value of equipment at lease end are
recorded as assets. Lease contract revenue is recognized over the lease term at
a constant rate of return on the Company's net investment in the lease. Initial
direct costs of acquiring a lease are capitalized and amortized over the lease
term in order to produce a constant net rate of return on the net lease
investment.

Allowance for Credit Losses -- The allowance for credit losses is
maintained at a level the Company believes is sufficient for estimated future
losses related to uncollectible lease receivables. Management estimates the
allowance based upon reviews of individual leases, historical loss experience,
current economic conditions, the known and inherent risk characteristics of the
various categories of leases and other pertinent factors. Leases determined
uncollectible are charged to the allowance. Provisions for losses and recoveries
on leases previously charged off are added to the allowance. Allowances relating
to leases sold are removed from the allowance for credit losses. The Company's
allowance for credit losses is based on estimates and qualitative evaluations,
and ultimate losses will vary from current estimates. These estimates are
reviewed periodically and as adjustments, either positive or negative, become
necessary they are reported in earnings in the period in which they become
known.

Cash and Cash Equivalents -- The Company considers all short-term
investments with an initial maturity of three months or less when purchased to
be cash equivalents. Cash received from SPE lease receivables is deposited in
separate bank accounts. These funds are required to be utilized to pay SPE debt
service and other associated costs, with the balance being remitted monthly to
the Company.

F-7
<PAGE> 62

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Estimates -- The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments -- The carrying amounts of assets and
liabilities excluding the Company's net investment in leases for which fair
value disclosures are not required are considered to be reasonable estimates of
fair value because of the short maturity of these items. The carrying amounts of
long-term debt are considered to approximate fair value because they bear
interest at relatively recently established market rates or at variable interest
rates which are repriced frequently.

Concentration of Credit and Financial Instrument Risk -- Approximately 46%
of the Company's lease portfolio consists of leases in select industries where
the Company has focused its marketing efforts. Of this percentage approximately
12% and 11% were in the fast food franchise and independent grocery store
industries, respectively. The Company controls its credit risk through credit
standards, limits on exposure, and by monitoring the financial condition of its
lessees. The Company uses a credit scoring system as a guide in evaluating the
credit risk of applicants. The Company generally requires the leased assets to
serve as collateral for the leases and requires all lessees to provide adequate
collateral protection and liability insurance throughout the base contract term.
Additionally, the Company controls its credit exposure to any one client or
industry by monitoring and limiting such exposure through additional credit
enhancement. Inherent to leasing is the residual value risk associated with
lease contracts. The Company manages this residual risk through adherence to a
residual valuation procedure at lease inception.

Interest Rate Collars -- In order to manage interest rate exposure, the
Company has entered into interest rate collar agreements on behalf of the owner
trust which have the effect of exchanging the owner trust's 8.2% fixed rate debt
amounting to $51.4 million (the notional amount at June 30, 1997) for variable
rate debt whereby the rate will not exceed 8% and not be less than 5.2%. Amounts
received by the owner trust under the agreements are used to cover monthly
expenses of the owner trust and any excess is recognized by the Company as other
income upon receipt from the owner trust.

Stock-Based Compensation -- Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," ("SFAS 123") encourages, but
does not require companies to record compensation cost for stock-based employee
compensation. The Company has chosen to continue to account for stock-based
compensation utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.

Effect of Recently Issued Accounting Standards -- Recently issued
accounting standards having relevant applicability to the Company consist
primarily of Statement of Financial Accounting Standards No. 125 ("SFAS No.
125") "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which is effective for transactions occurring
after 1996, applied prospectively. The primary effect of adoption of SFAS No.
125 is in the recording of an asset relating to the present value of the net
cash flow resulting from servicing leases sold. Other relevant recently issued
accounting standards consist of Statement of Financial Accounting Standards No.
128 "Earnings per Share", Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information",
each of which relate to additional reporting and disclosure requirements
effective for financial statement periods beginning after December 15, 1997. It
is not expected that the adoption of these accounting pronouncements will have a
material effect on the Company's operating results or financial condition.

F-8
<PAGE> 63

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Interim Financial Statements -- The interim financial data at and for the
six months ended June 30, 1996 and 1997 is unaudited; however, in the opinion of
Company management, the interim data includes all adjustments, consisting only
of normal recurring adjustments necessary for a fair statement of results for
the interim periods. The interim results of operations for the six months ended
June 30, 1997 are not necessarily indicative of results expected for the entire
year.

NOTE 2. NET INVESTMENT IN LEASES

The Company's investments in leases have been pledged as collateral for
certain notes payable. The investment in leases which are in SPE's and pledged
as collateral for related debt are referred to herein as "Securitized". The net
investment in leases presented on a basis by type of borrowing for which the
investment is pledged as collateral is summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Securitized --
Minimum lease payments receivable................... $ 85,194 $106,279 $ 95,559
Estimated residual value of leased equipment, net... 7,489 9,719 9,651
Unearned lease revenue.............................. (15,935) (19,683) (17,106)
-------- -------- --------
Securitized, net............................... 76,748 96,315 88,104
-------- -------- --------
Not Securitized --
Minimum lease payments receivable................... 12,578 41,807 15,205
Estimated residual value of leased equipment, net... 1,833 2,337 2,200
Unearned lease revenue.............................. (2,007) (8,576) (3,283)
-------- -------- --------
Not Securitized, net........................... 12,404 35,568 14,122
-------- -------- --------
Allowance For Credit Losses......................... (889) (1,323) (1,005)
Initial Direct Costs, net........................... 2,096 4,527 2,669
-------- -------- --------
Net Investment in Leases....................... $ 90,359 $135,087 $ 103,890
======== ======== ========
</TABLE>

Accumulated amortization of initial direct costs approximated $2.4 million
and $3.1 million at December 31, 1995 and 1996, respectively. As of December 31,
1996, future minimum annual lease payments receivable excluding guaranteed
residual values are as follows (in thousands):

<TABLE>
<S> <C>
1997.............................................. $ 52,432
1998.............................................. 39,668
1999.............................................. 27,071
2000.............................................. 24,312
2001 and thereafter............................... 4,603
--------
$148,086
========
</TABLE>

F-9
<PAGE> 64

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

A summary of activity in the allowance for credit losses account is as
follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- --------------------------
1994 1995 1996 1996 1997
----- ----- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE, beginning of period................ $ 332 $ 548 $ 889 $ 889 $ 1,323
----- ----- ------- ------ ------
Provision for credit losses................. 223 621 1,137 345 402
----- ----- ------- ------ ------
Charge-offs................................. (127) (354) (1,691) (328) (226)
Recoveries.................................. 120 74 988 283 31
----- ----- ------- ------ ------
Net Charge-offs............................. (7) (280) (703) (45) (195)
----- ----- ------- ------ ------
Decrease related to leases sold............. -- -- -- -- (525)
----- ----- ------- ------ ------
BALANCE, end of period...................... $ 548 $ 889 $ 1,323 $ 1,189 $ 1,005
===== ===== ======= ====== ======
</TABLE>

NOTE 3. NOTES PAYABLE -- RECOURSE

Notes payable for which the lender has recourse against the Company are
secured by guarantees of shareholders and for lines of credit borrowings,
underlying pledged leases, and are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payable to bank drawn on a $15 million credit line, interest
payable monthly at 2.0% above the 30 day LIBOR rate, (7.5% at
December 31, 1996), due May 1997............................. $4,551 $14,996 $ 2,954
Payable to bank drawn on a $15 million credit line (reduced to
$10 million in February 1997), interest payable monthly at
the annual Eurodollar rate, (7.65% to 7.9% at December 31,
1996), due October 1997...................................... 2,772 15,000 6,905
Payable to bank drawn on a $7.5 million credit line, interest
payable monthly at 2.0% above LIBOR (7.5% at December 31,
1996), due July 1997......................................... 1,510 1,526 1,253
Payable to affiliate, interest payable monthly at 2.0% above
LIBOR, due May and July 1997................................. -- 750 1,650
Acquisition notes payable, interest at 8%, $750,000 due October
1998 with remaining principal and interest due quarterly to
2007, net of imputed interest discount of $255,000........... -- -- 4,750
Other.......................................................... 147
------ ------- -------
Total Notes Payable -- Recourse...................... $8,833 $32,272 $17,659
====== ======= =======
</TABLE>

The payable to affiliate is pursuant to a borrowing arrangement whereby the
Company obtains working capital funds on the same terms as the related party
borrows from a financial institution. The related party's debt is guaranteed by
the related party's shareholders, which includes certain of the Company's
executive officers and owners and by each of the Companies and Affiliates,
except LLC IV.

In addition to the above, the Company has a $10 million line of credit
available to October 1997 providing for borrowings bearing interest at the
higher of the Bank's prime rate or 1.75% above LIBOR. In total, at December 31,
1996, the Company has approximately $16 million of unused line-of-credit
availability. The Company's lease receivables, except for leases pledged as SPE
collateral, are pledged as collateral for the line-of-credit borrowings. Terms
of certain credit agreements require, among other things, that the Company
maintain certain financial ratios and net worth, as defined. The Company is in
compliance with these

F-10
<PAGE> 65

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

restrictive covenants at December 31, 1996. The borrowings provide for principal
repayments that are generally payable as lease receivable payments are received.

At December 31, 1996, future annual maturities of notes payable -- recourse
principal payments are estimated as follows (in thousands):

<TABLE>
<S> <C>
1997............................................... $10,137
1998............................................... 8,404
1999............................................... 6,532
2000............................................... 4,025
2001 and thereafter................................ 3,174
-------
$32,272
=======
</TABLE>

Information regarding recourse borrowings is summarized as follows (dollars
in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Average balance............................... $ 3,828 $13,412 $14,847
Average interest rate......................... 7.4% 8.7% 8.4%
Maximum month-end balance..................... $11,481 $26,527 $32,272
</TABLE>

NOTE 4. NOTES PAYABLE -- NON-RECOURSE

During 1994, Corp III entered into a revolving asset purchase facility and
issued $30 million of non-recourse debt as part of a multi-bank asset-backed
commercial paper program. The facility was purchased by a corporate entity that
issues commercial paper in the public market (the "Purchaser") and the interest
rate on this borrowing was the Purchaser's commercial paper rate plus a program
fee. During 1995, the remaining portion of Corp III borrowings, approximately
$28.5 million, were paid in full pursuant to an assignment of leases transaction
in which LLC IV acquired the leases and a security interest in the underlying
assets.

During 1995, LLC IV entered into a $70 million revolving asset purchase
facility and issued debt as part of an asset-backed financing conduit program.
This facility was increased to $90 million during 1996. The facility was
purchased by an entity that issues commercial paper (the "Purchaser"). The
interest rate on the $53.3 million initial tranche of borrowings, which are due
in 2002, is approximately 6.5%. The interest rate on additional borrowings is
based upon the 30-day LIBOR rates. At December 31, 1996 and June 30, 1997,
approximately $61 million and $4 million (unaudited) of variable rate borrowings
were outstanding. At December 31, 1995 and 1996, approximately $64 million and
$90 million, respectively, of borrowings were outstanding on this facility and
the average interest rate approximated 6.5% and 6.0%, respectively. At June 30,
1997, approximately $81 million (unaudited) of borrowings were outstanding on
the facility and the average interest rate approximated 6.5%. Borrowings are
generally payable as lease receivable payments are received. LLC IV entered into
an interest rate swap agreement whereby the floating rate interest risk exposure
on the facility is borne by T&W Financial Corporation and not by LLC IV.

Private placement fees, legal, printing and other expenses associated with
the issuance of lease-backed notes are being amortized over the life of the
notes to produce a constant periodic rate of interest. Amortization expense,
which is included in interest expense, approximated $227,000, $373,000 and
$215,000 for the years ended December 31, 1994, 1995 and 1996, respectively, and
$113,000 (unaudited) for the six months ended June 30, 1997. Accumulated
amortization approximated $238,000 and $373,000 at December 31, 1995 and 1996,
respectively.

F-11
<PAGE> 66

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1996, future annual maturities of notes payable
non-recourse are estimated as follows (in thousands):

<TABLE>
<S> <C>
1997............................................... $33,993
1998............................................... 24,095
1999............................................... 15,547
2000............................................... 16,034
2001 and thereafter................................ 306
-------
$89,975
=======
</TABLE>

Information regarding non-recourse borrowings is summarized as follows
(dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Average balance............................... $32,634 $49,778 $80,080
Average interest rate......................... 7.1% 6.7% 6.5%
Maximum month-end balance..................... $36,245 $67,686 $89,989
</TABLE>

Cash paid by the Company for interest (related to both recourse and
non-recourse debt) approximated $2.3 million, $4.1 million and $6.2 million in
1994, 1995 and 1996, respectively.

NOTE 5. RELATED PARTY TRANSACTIONS

The principal shareholder of the Company was a major shareholder of a bank.
The Company had deposits in accounts with this bank of approximately $600,000
and $870,000 at December 31, 1995 and 1996, respectively.

The Company has lease receivables from companies owned by its principal
shareholders; the Company's net investment in such lease receivables
approximates $2.6 million at December 31, 1996. Additionally, the Company leases
property and equipment from it's principal shareholder under short-term
operating leases, rent expense for which approximated $270,000, $333,000 and
$60,000 in 1994, 1995 and 1996, respectively.

During 1996, the Company distributed to its shareholders certain non-cash
assets and investments having a net book value of approximately $960,000, such
net book value considered by the Company's Board of Directors to approximate
fair value at the distribution date. During 1994 and 1995, the Company
shareholders made capital contributions to the Company (primarily non-cash) of
approximately $208,000 and $342,000, respectively.

Commencing in July 1996, the Company receives certain management and lease
sourcing services from a related party owned and operated by the Company's
shareholders. During the year ended December 31, 1996 and during the six months
ended June 30, 1997 (unaudited), the Company paid fees of $600,000 to this
related party. As described in Note 3, commencing in 1996, the Company has a
line of credit borrowing arrangement with this related party.

NOTE 6. STOCK OPTIONS AND EMPLOYEE BENEFIT PLAN

In July 1996, the Company granted fully vested, ten-year option rights to
certain key employees for the purchase of 6% of the Company's shareholders'
equity at an exercise price which was determined by the Company's Board of
Directors to be not less than the fair value of such ownership interest at the
date of grant. Inasmuch as all option rights issued to employees have an
exercise price not less than the fair market value of the Company's underlying
securities on the date of grant, in accordance with accounting for such options
utilizing the intrinsic value method there is no related compensation expense
recorded in the Company's financial statements. Had compensation cost for
stock-based compensation been determined based on the fair value of the options
at the grant dates consistent with the method prescribed by SFAS 123, the
Company's net income would not have differed materially. See Note 9 -- Events
(Unaudited) Subsequent to Date of Report of Independent Accountants for
information regarding the subsequent exercise of options.

F-12
<PAGE> 67

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Company maintains a qualified retirement plan pursuant to Section
401(k) of the Internal Revenue Code with a salary deferral feature and matching
component covering all eligible employees. Company contributions are
discretionary, as determined annually by the Board of Directors, and
approximated $53,000, $59,000 and $67,000 for the years ended December 31, 1994,
1995 and 1996, respectively.

NOTE 7. CONTINGENCIES

Subsequent to December 31, 1996, the Company filed a complaint with the
Pierce County Superior Court of Washington against several parties, asserting
claims for breach of contract, fraud and negligence in a lease transaction. The
Company is alleging joint and several liability and is seeking approximately
$940,000 plus interest and legal fees. The receivable relating to this matter is
included in other assets at December 31, 1996 and June 30, 1997.

In addition to the litigation noted above, the Company is from time to time
involved in various claims and legal proceedings of a nature considered normal
to its business. Although the ultimate disposition of legal proceedings cannot
be predicted with certainty, it is the present opinion of the Company's
management that the outcome of the above noted litigation and other pending
legal proceedings will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.

NOTE 8. SUBSEQUENT EVENTS

In February 1997, the Company entered into a three-year, revolving credit
$100 million commercial paper securitization facility with a conduit entity, and
in connection therewith a SPE was formed to issue lease-backed certificates.
Pursuant to terms of the facility, the Company sells and transfers pools of
leases to the SPE which then sells and transfers rights and title to the leased
equipment to a trust in the form of certificates, and the Company retains
servicing rights for which it receives monthly servicing fee income. These
certificates in turn are sold to a third party special purpose entity, except
for a portion which is not received in cash. In February 1997, the Company
received proceeds from this facility of approximately $10 million and accounted
for such transaction for financial reporting purposes as a sale of the lease
interests. See Note 9 -- Events (Unaudited) Subsequent to Date of Report of
Independent Accountants for information regarding additional sales to this
facility.

NOTE 9. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT
ACCOUNTANTS

The Restructuring. In connection with the Company's initial public
offering, the Company has entered into certain agreements with its existing
shareholders pursuant to which there will be a restructuring of the Company's
corporate organization and ownership (the "Restructuring") to be effective
concurrently with the closing of the offering. Among other things, the
Restructuring will result in the transfer of substantially all of the Company's
and its affiliated entities' assets and liabilities to a newly formed limited
liability company to be owned 85% by the Company and 15% by a limited liability
company owned by the Company's senior management. Additionally, upon completion
of the Restructuring and initial public offering, the Company will no longer be
treated as pass-through entities for income tax purposes.

The accompanying unaudited June 30, 1997 pro forma combined balance sheet
information is presented on a basis giving effect to a 15% minority interest and
estimated deferred income tax liabilities, both of which will be determined and
recorded as of the effective date of the transaction and will decrease
shareholders' equity and increase minority interest and deferred tax
liabilities. Deferred income taxes to be recorded in connection with the
conversion of the Company to a tax paying entity relate to temporary differences
arising from accounting for leases as (i) direct financing for financial
reporting purposes and as "true leases" or operating leases for tax purposes,
and (ii) sale transactions for financial reporting purposes versus debt or
borrowing transactions for income tax purposes, both differences initially
resulting in a net deferral of income for income tax purposes.

F-13
<PAGE> 68

T&W FINANCIAL CORPORATION AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The accompanying unaudited pro forma combined statements of income
information is presented on a basis giving effect to establishment of a 15%
minority interest and conversion from an affiliated group of pass-through
entities to a taxable corporate entity, as if such transactions and events had
occurred as of the beginning of the periods presented. The pro forma tax
provision excludes the effect of recognizing the deferred tax liability upon
change in tax status, which will be reported as a component of the income tax
provision. Pro forma income per share is determined on a basis of 5.8 million
shares outstanding, the actual number of shares to be outstanding immediately
prior to the closing of the offering.

Business Combination -- On June 2, 1997, the Company acquired for
approximately $5.5 million, the operations of Commercial Capital, including
substantially all the assets and liabilities related to this equipment leasing
business located near Kansas City. The purchase price was comprised of 10% cash
and a promissory note payable for the remainder. The promissory note bears
interest at 8%, is guaranteed by the Company and the Company's shareholders, and
is due in equal annual installments, including interest, through 2007;
additionally, 15% of the promissory note is due on the one year anniversary date
of the effective date of the Company's initial public offering. The business
combination has been accounted for utilizing the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based upon estimates of fair values. The estimated fair
value of assets acquired in the acquisition approximated $7.1 million, including
intangible assets of approximately $2.2 million, and liabilities assumed
approximated $1.6 million. Intangible assets recorded in purchase accounting are
amortized over their respective estimated lives, which range from 5 to 10 years.
The Company's operating results for 1996 and the six months ended June 30, 1997,
determined on a pro forma basis as if the business combination had occurred as
of the beginning of such periods, would not have differed materially from actual
operating results.

Exercise of Stock Option -- In July 1997, certain members of Company senior
management exercised in full all outstanding and fully vested stock options in
exchange for demand promissory notes having a combined total amount of
approximately $1.1 million. Pursuant to terms of the stock options, the Company
issued 295,800 shares at an exercise price of $3.93 per share. It is anticipated
that a sufficient number of shares will be sold in the Company's initial public
stock offering by the exercising option holders such that the net proceeds will
be paid to the Company in full repayment of the promissory notes.

Gain on Sale of Leases -- During the six months ended June 30, 1997 the
Company sold leases having a net investment of approximately $59.7 million
through the commercial paper securitization facility as described in Note 8.
Gain on sale of leases sold in securitization transactions, which totaled $3.4
million during the six months ended June 30, 1997, is recorded based on cash
received and the present value of the estimated future amounts to be received by
the Company in connection with such sales. The Company has the right to receive
any excess cash flows of the trust; such amount is included in the Company's
balance sheet as the securitization receivable. Cash flows to ultimately be
received are dependent upon the actual default rates and recoveries experienced
on the leases held by the trust. The securitization receivable is reduced by an
allowance which is estimated by the Company to be adequate to cover future
credit losses. Such allowance is based on estimates and qualitative evaluation,
and ultimate losses will vary from current estimates. To the extent that events
occur which cause such cash flows to be materially below those estimated, the
Company would reduce the carrying amount of the securitization receivable and
record a charge to earnings. Such charge would be recorded in the period in
which the event occurred or became known to management.

Line of Credit -- The Company recently entered into a commitment letter
with CoreStates Bank, N.A. for a secured line of credit in the amount of $50
million, which will replace the existing line of credit with this bank. The
facility would be utilized for the financing of eligible leases and loans at an
interest rate of LIBOR plus 1.5%. Such credit facility would be secured by the
leases financed with funds from such credit facility and by a guarantee from
Funding Company VI and senior management, and would limit the amount of funds
which may be advanced to the Company to a percentage of the discounted value of
such leases. Additionally, the Company has renewed or is in the process of
negotiating extensions for its other bank lines of credit.

F-14
<PAGE> 69

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ANY
UNDERWRITER OR THE COMPANY OR ANY SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON
STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Restructuring..................... 17
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Combined Financial and
Operating Data...................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 31
Management............................ 42
Certain Transactions.................. 45
Principal and Selling Shareholders.... 48
Description of Capital Stock.......... 49
Shares Eligible for Future Sale....... 50
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Index to Financial Statements......... F-1
</TABLE>

------------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,560,000 SHARES
LOGO - T&W FINANCIAL CORPORATION

COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
OPPENHEIMER & CO., INC.

PRUDENTIAL SECURITIES INCORPORATED

, 1997
======================================================
<PAGE> 70

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

<TABLE>
<S> <C>
Registration Fee Securities and Exchange Commission............................. $ 14,274
NASD Filing Fee................................................................. $ 5,210
Nasdaq National Market Listing Fee.............................................. $ 37,535
Accountant's Fees and Expenses.................................................. $ 75,000
Blue Sky Filing and Counsel Fees and Expenses................................... $ 10,000
Printing and Engraving Expenses................................................. $150,000
Legal Fees and Expenses......................................................... $275,000
Transfer Agent and Registration Fees............................................ $ 20,000
Directors' and Officers' Liability Insurance.................................... $100,000
Miscellaneous Expenses.......................................................... $ 12,981
TOTAL......................................................................... $700,000
========
</TABLE>

- ---------------

* All expenses other than the Securities and Exchange Commission Registration
Fee, the NASD Filing Fee and the Nasdaq National Market Fee are estimated. All
expenses are payable by the Company.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article 6 of the Registrant's Articles of Incorporation
(Exhibit 3.1 hereto) and Article VIII of the Registrant's Bylaws (Exhibit 3.2
hereto) provide for mandatory indemnification of the Registrant's directors,
officers, employees and agents to the maximum extent permitted by law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in that capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.

Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self-dealing or illegal
corporate loans or distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article 5 of the Registrant's Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.

Reference is made to the Registrant's Articles of Incorporation, filed as
Exhibit 3.1 to this Registration Statement, and the Registrant's Bylaws, filed
as Exhibit 3.2 to this Registration Statement.

Reference is also made to the form of Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement for certain provisions regarding the
indemnification of officers and directors of the Registrant by the Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since August 1, 1994, the Registrant has issued the following unregistered
securities:

An aggregate of 295,800 shares of Common Stock were issued in July
1997 to Paul B. Luke and Kenneth W. McCarthy, Jr. upon exercise of stock
options at an exercise price of $3.93 per share. The

II-1
<PAGE> 71

issuances of Common Stock to Messrs. Luke and McCarthy were made in
reliance upon the exemption from registration set forth in Section 4(2) of
the Securities Act relating to sales by an issuer not involving a public
offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* Form of Restructuring Agreement dated August , 1997 by and among T&W Financial
Corporation, T&W Leasing, Inc., T&W Funding Company I, L.L.C., T&W Funding Company
IV, L.L.C., T&W Funding Company V, L.L.C., T&W Funding Company VI, L.L.C., T&W
Finance Corp. II, T&W Finance Corp. III, Michael A. Price, Trustee of the Price
Grantor Retained Annuity Trusts, Michael A. Price, individually, Thomas W. Price,
P.L.M. Consulting Group, L.L.C., Kenneth W. McCarthy, Jr. and Paul B. Luke.
3.1* Articles of Incorporation of T&W Financial Corporation.
3.2* Bylaws of T&W Financial Corporation.
4.1 Specimen Stock Certificate.
5.1* Opinion of Graham & James LLP.
10.1* Trust and Security Agreement dated February 1, 1997, by and among T&W Funding
Company I, L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.2* Contribution Agreement dated February 1, 1997, by and among T&W Financial
Corporation, T&W Funding Company V, L.L.C., T&W Funding Company VI, L.L.C. and T&W
Funding Company I, L.L.C.
10.3* Servicing Agreement dated February 1, 1997, by and among T&W Funding Company I,
L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.4* Certificate Purchase Agreement dated February 7, 1997, by and among T&W Financial
Corporation, T&W Funding Company I, L.L.C. and Centre Square Funding Corporation.
10.5* Assignment and Assumption Agreement dated February 7, 1997, by and between T&W
Funding Company V, L.L.C. and T&W Funding Company I, L.L.C.
10.6* Assignment and Assumption Agreement dated February 7, 1997, by and between T&W
Funding Company VI, L.L.C. and T&W Funding Company I, L.L.C.
10.7* Insurance Agreement dated February 1, 1997, by and among MBIA Insurance
Corporation, T&W Financial Corporation, T&W Funding Company I, L.L.C., K&P
Financial Corp. I and Norwest Bank Minnesota, National Association.
10.8* Certificate Guaranty Insurance Policy, issued by MBIA Insurance Corporation, dated
February 7, 1997.
10.9* Commitment to Issue a Certificate Guaranty Insurance Policy, issued by MBIA
Insurance Corporation, dated February 5, 1997.
10.10* Custodian Agreement dated February 4, 1997, by and among T&W Financial
Corporation, T&W Funding Company VI, L.L.C., T&W Funding Company I, L.L.C.,
Seafirst Bank N.A., CoreStates Bank, N.A., and Norwest Bank Minnesota, National
Association.
10.11* Interest Rate Hedge Assignment dated February 7, 1997, by and between T&W
Financial Corporation and CoreStates Bank, N.A.
10.12* Master Agreement dated February 4, 1997 by and between T&W Funding Company IV,
L.L.C. and CoreStates Bank, N.A.
10.13* Indenture dated July 1, 1995, by and among T&W Funding Company IV, L.L.C., T&W
Leasing, Inc., and Norwest Bank Minnesota, National Association.
</TABLE>

II-2
<PAGE> 72

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
10.14* Second Supplemental Indenture dated April 30, 1996, by and among T&W Funding
Company IV, L.L.C., T&W Financial Corporation and Norwest Bank Minnesota, National
Association.
10.15* Contribution Agreement dated July 1, 1995, by and among T&W Leasing, Inc., T&W
Finance Corp. III, T&W Finance Corp. VI, T&W Finance Company V, L.L.C. and T&W
Funding Company IV, L.L.C.
10.16* First Amendment to Contribution Agreement dated April 30, 1996, by and among T&W
Funding Company IV, L.L.C., T&W Financial Corporation, T&W Finance Corp. III, T&W
Finance Corp. IV and T&W Finance Company V, L.L.C.
10.17* Servicing Agreement dated July 1, 1995, by and among T&W Funding Company IV,
L.L.C., T&W Leasing, Inc. and Norwest Bank Minnesota, National Association.
10.18* Note Purchase Agreement dated July 28, 1995, by and among T&W Funding Company IV,
L.L.C., T&W Leasing, Inc., and TLC Investment Trust.
10.19* Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Corp. III and T&W Funding Company IV, L.L.C.
10.20* Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Corp. IV and T&W Funding Company IV, L.L.C.
10.21* Assignment and Assumption Agreement dated July 28, 1995, by and between T&W
Finance Company V, L.L.C. and T&W Funding Company IV, L.L.C.
10.22* Insurance Agreement dated July 1, 1995, by and among MBIA Insurance Corporation,
T&W Leasing, Inc., T&W Funding Company IV, L.L.C., K&P Finance Corp. and Norwest
Bank Minnesota, National Association.
10.23* Note Insurance Policy, issued by MBIA Insurance Corporation, dated July 28, 1995.
10.24* Master Agreement dated August 1, 1995, by and between T&W Funding Company IV,
L.L.C. and Merrill Lynch Capital Services, Inc.
10.25* Asset Purchase Agreement dated June 2, 1997, by and among T&W Funding Company VI,
L.L.C., Commercial Capital Corporation, James R. Neese, Larry E. Rice, Trustee and
Larry E. Rice, Individually.
10.26* Form of Promissory Note dated June 2, 1997.
10.27* Unconditional Guaranty dated June 2, 1997, by and among Michael A. Price,
Katherine M. Price, Kenneth W. McCarthy, Jr., Carol L. McCarthy, Paul B. Luke and
T&W Financial Corporation in favor of Commercial Capital Corporation, James R.
Neese and Larry E. Rice.
10.28* Business Loan Agreement dated December 10, 1996, by and between T&W Funding
Company VI, L.L.C. and U.S. Bank of Washington, National Association.
10.29* Alternative Rate Options Promissory Note dated December 10, 1996, by and between
T&W Funding Company VI, L.L.C. and U.S. Bank of Washington, National Association.
10.30* Business Loan Agreement dated November 22, 1996, by and between T&W Funding
Company VI, L.L.C. and Bank of America N.W., dba Seafirst Bank.
10.31* Collateral Line, Loan and Security Agreement dated November 22, 1996, by and
between T&W Funding Company VI, L.L.C. and Bank of America NW, N.A., dba Seafirst
Bank.
10.32* Business Loan Agreement dated March 29, 1996, by and between T&W Funding Company
VI, L.L.C. and Key Bank of Washington.
10.33* Loan Modification and/or Extension Agreement dated July 31, 1996, by and between
T&W Funding Company VI, L.L.C. and Key Bank of Washington.
10.34* Amended and Restated Master Loan and Security Agreement dated October 30, 1996, by
and between T&W Funding Company VI, L.L.C. and CoreStates Bank, N.A.
</TABLE>

II-3
<PAGE> 73

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
10.35* Commercial Lease Agreement dated December 31, 1991, by and between T&W Financial
Corporation (as lessee) and Michael A. Price (as lessor).
10.36* Amended and Restated Commercial Lease Agreement dated January 1, 1997, by and
between T&W Financial Corporation (as lessee) and Michael A. Price (as lessor).
10.37* Commercial and Industrial Lease Agreement dated November 1, 1996, by and among
James R. Neese, Terry Neese (as lessors) and Commercial Capital Corporation (as
lessee) (Suite 100 facility).
10.38* Commercial and Industrial Lease Agreement dated November 1, 1996, by and among
James R. Neese, Terry Neese (as lessors) and Commercial Capital Corporation (as
lessee) (Suite 200 facility).
10.39* Stock Option Letter Agreement dated June 30, 1996, by and between T&W Financial
Corporation and Paul B. Luke.
10.40* Addendum to Stock Option Letter Agreement dated August 15, 1997.
10.41* Stock Option Letter Agreement dated June 30, 1996, by and between T&W Financial
Corporation and Kenneth W. McCarthy, Jr.
10.42* Addendum to Stock Option Letter Agreement dated August 15, 1997.
10.43* Promissory Note dated August 19, 1997 by and between T&W Financial Corporation and
Paul B. Luke.
10.44* Promissory Note dated August 18, 1997 by and between T&W Financial Corporation and
Kenneth W. McCarthy, Jr.
10.45* Form of T&W Financial Services Company L.L.C. Operating Agreement.
10.46* T&W Financial Corporation 1997 Stock Option Plan.
10.47* T&W Financial Corporation 1997 Director Stock Grant Plan.
10.48* T&W Financial Corporation 1997 Employee Stock Purchase Plan.
10.49* Employment and Noncompetition Agreement dated June 2, 1997, by and between T&W
Financial Corporation and James R. Neese.
10.50* Employment and Noncompetition Agreement dated June 2, 1997, by and between T&W
Financial Corporation and Larry E. Rice.
10.51* Form of Management Agreement dated August , 1997, by and between T&W Financial
Services Company L.L.C. and P.L.M. Consulting Group, L.L.C.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Graham & James LLP (included in its opinion filed as Exhibit 5.1
hereto).
23.2 Consent of BDO Seidman, LLP.
24.1* Power of Attorney (included on signature page).
27.1* Financial Data Schedule.
</TABLE>

- ---------------

* Filed previously.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In

II-4
<PAGE> 74

the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant- in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 75

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Seattle, State of
Washington, on August 19, 1997.

T&W FINANCIAL CORPORATION

By /s/ MICHAEL A. PRICE
------------------------------------
Michael A. Price, Chief Executive
Officer

POWER OF ATTORNEY

Each person whose individual signature appears below hereby constitutes and
appoints Michael A. Price and Kenneth W. McCarthy, Jr., and each of them
severally, as his true and lawful attorney-in-fact, with full power of
substitution, to execute in the name and on behalf of such person, individually
and in each capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments, and any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below:

<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- --------------------------------------------- ------------------------------- ----------------
<S> <C> <C>

/s/ MICHAEL A. PRICE Chief Executive Officer, August 19, 1997
- --------------------------------------------- (Principal Executive Officer)
Michael A. Price and Director

/s/ THOMAS W. PRICE President and Director August 19, 1997
- ---------------------------------------------
Thomas W. Price

/s/ PAUL B. LUKE Senior Vice President, August 19, 1997
- --------------------------------------------- Treasurer and Secretary
Paul B. Luke (Principal Financial and
Accounting Officer) and
Director

/s/ KENNETH W. MCCARTHY, JR. Senior Vice President and August 19, 1997
- --------------------------------------------- Director
Kenneth W. McCarthy, Jr.

/s/ KENNETH L. HATCH Director August 7, 1997
- ---------------------------------------------
Kenneth L. Hatch

/s/ DAVID N. SYFERD Director August 7, 1997
- ---------------------------------------------
David N. Syferd
</TABLE>

II-6
<PAGE> 76

EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement..........................................
2.1* Form of Restructuring Agreement dated August , 1997 by and among T&W
Financial Corporation, T&W Leasing, Inc., T&W Funding Company I, L.L.C.,
T&W Funding Company IV, L.L.C., T&W Funding Company V, L.L.C., T&W
Funding Company VI, L.L.C., T&W Finance Corp. II, T&W Finance Corp. III,
Michael A. Price, Trustee of the Price Grantor Retained Annuity Trusts,
Michael A. Price, individually, Thomas W. Price, P.L.M. Consulting
Group, L.L.C., Kenneth W. McCarthy, Jr. and Paul B. Luke................
3.1* Articles of Incorporation of T&W Financial Corporation..................
3.2* Bylaws of T&W Financial Corporation.....................................
4.1 Specimen Stock Certificate..............................................
5.1* Opinion of Graham & James LLP...........................................
10.1* Trust and Security Agreement dated February 1, 1997, by and among T&W
Funding Company I, L.L.C., T&W Financial Corporation and Norwest Bank
Minnesota, National Association.........................................
10.2* Contribution Agreement dated February 1, 1997, by and among T&W
Financial Corporation, T&W Funding Company V, L.L.C., T&W Funding
Company VI, L.L.C. and T&W Funding Company I, L.L.C. ...................
10.3* Servicing Agreement dated February 1, 1997, by and among T&W Funding
Company I, L.L.C., T&W Financial Corporation and Norwest Bank Minnesota,
National Association....................................................
10.4* Certificate Purchase Agreement dated February 7, 1997, by and among T&W
Financial Corporation, T&W Funding Company I, L.L.C. and Centre Square
Funding Corporation.....................................................
10.5* Assignment and Assumption Agreement dated February 7, 1997, by and
between T&W Funding Company V, L.L.C. and T&W Funding Company I,
L.L.C. .................................................................
10.6* Assignment and Assumption Agreement dated February 7, 1997, by and
between T&W Funding Company VI, L.L.C. and T&W Funding Company I,
L.L.C. .................................................................
10.7* Insurance Agreement dated February 1, 1997, by and among MBIA Insurance
Corporation, T&W Financial Corporation, T&W Funding Company I, L.L.C.,
K&P Financial Corp. I and Norwest Bank Minnesota, National
Association.............................................................
10.8* Certificate Guaranty Insurance Policy, issued by MBIA Insurance
Corporation, dated February 7, 1997.....................................
10.9* Commitment to Issue a Certificate Guaranty Insurance Policy, issued by
MBIA Insurance Corporation, dated February 5, 1997......................
10.10* Custodian Agreement dated February 4, 1997, by and among T&W Financial
Corporation, T&W Funding Company VI, L.L.C., T&W Funding Company I,
L.L.C., Seafirst Bank N.A., CoreStates Bank, N.A., and Norwest Bank
Minnesota, National Association.........................................
10.11* Interest Rate Hedge Assignment dated February 7, 1997, by and between
T&W Financial Corporation and CoreStates Bank, N.A. ....................
10.12* Master Agreement dated February 4, 1997 by and between T&W Funding
Company IV, L.L.C. and CoreStates Bank, N.A. ...........................
10.13* Indenture dated July 1, 1995, by and among T&W Funding Company IV,
L.L.C., T&W Leasing, Inc., and Norwest Bank Minnesota, National
Association.............................................................
</TABLE>

<PAGE> 77

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <S> <C>
10.14* Second Supplemental Indenture dated April 30, 1996, by and among T&W
Funding Company IV, L.L.C., T&W Financial Corporation and Norwest Bank
Minnesota, National Association.........................................
10.15* Contribution Agreement dated July 1, 1995, by and among T&W Leasing,
Inc., T&W Finance Corp. III, T&W Finance Corp. VI, T&W Finance Company
V, L.L.C. and T&W Funding Company IV, L.L.C. ...........................
10.16* First Amendment to Contribution Agreement dated April 30, 1996, by and
among T&W Funding Company IV, L.L.C., T&W Financial Corporation, T&W
Finance Corp. III, T&W Finance Corp. IV and T&W Finance Company V,
L.L.C. .................................................................
10.17* Servicing Agreement dated July 1, 1995, by and among T&W Funding Company
IV, L.L.C., T&W Leasing, Inc. and Norwest Bank Minnesota, National
Association.............................................................
10.18* Note Purchase Agreement dated July 28, 1995, by and among T&W Funding
Company IV, L.L.C., T&W Leasing, Inc., and TLC Investment Trust.........
10.19* Assignment and Assumption Agreement dated July 28, 1995, by and between
T&W Finance Corp. III and T&W Funding Company IV, L.L.C. ...............
10.20* Assignment and Assumption Agreement dated July 28, 1995, by and between
T&W Finance Corp. IV and T&W Funding Company IV, L.L.C. ................
10.21* Assignment and Assumption Agreement dated July 28, 1995, by and between
T&W Finance Company V, L.L.C. and T&W Funding Company IV, L.L.C. .......
10.22* Insurance Agreement dated July 1, 1995, by and among MBIA Insurance
Corporation, T&W Leasing, Inc., T&W Funding Company IV, L.L.C., K&P
Finance Corp. and Norwest Bank Minnesota, National Association..........
10.23* Note Insurance Policy, issued by MBIA Insurance Corporation, dated July
28, 1995................................................................
10.24* Master Agreement dated August 1, 1995, by and between T&W Funding
Company IV, L.L.C. and Merrill Lynch Capital Services, Inc. ............
10.25* Asset Purchase Agreement dated June 2, 1997, by and among T&W Funding
Company VI, L.L.C., Commercial Capital Corporation, James R. Neese,
Larry E. Rice, Trustee and Larry E. Rice, Individually..................
10.26* Form of Promissory Note dated June 2, 1997..............................
10.27* Unconditional Guaranty dated June 2, 1997, by and among Michael A.
Price, Katherine M. Price, Kenneth W. McCarthy, Jr., Carol L. McCarthy,
Paul B. Luke and T&W Financial Corporation in favor of Commercial
Capital Corporation, James R. Neese and Larry E. Rice...................
10.28* Business Loan Agreement dated December 10, 1996, by and between T&W
Funding Company VI, L.L.C. and U.S. Bank of Washington, National
Association.............................................................
10.29* Alternative Rate Options Promissory Note dated December 10, 1996, by and
between T&W Funding Company VI, L.L.C. and U.S. Bank of Washington,
National Association....................................................
10.30* Business Loan Agreement dated November 22, 1996, by and between T&W
Funding Company VI, L.L.C. and Bank of America N.W., dba Seafirst
Bank....................................................................
10.31* Collateral Line, Loan and Security Agreement dated November 22, 1996, by
and between T&W Funding Company VI, L.L.C. and Bank of America NW, N.A.,
dba Seafirst Bank.......................................................
10.32* Business Loan Agreement dated March 29, 1996, by and between T&W Funding
Company VI, L.L.C. and Key Bank of Washington...........................
10.33* Loan Modification and/or Extension Agreement dated July 31, 1996, by and
between T&W Funding Company VI, L.L.C. and Key Bank of Washington.......
</TABLE>

<PAGE> 78

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <S> <C>
10.34* Amended and Restated Master Loan and Security Agreement dated October
30, 1996, by and between T&W Funding Company VI, L.L.C. and CoreStates
Bank, N.A. .............................................................
10.35* Commercial Lease Agreement dated December 31, 1991, by and between T&W
Financial Corporation (as lessee) and Michael A. Price (as lessor)......
10.36* Amended and Restated Commercial Lease Agreement dated January 1, 1997,
by and between T&W Financial Corporation (as lessee) and Michael A.
Price (as lessor).......................................................
10.37* Commercial and Industrial Lease Agreement dated November 1, 1996, by and
among James R. Neese, Terry Neese (as lessors) and Commercial Capital
Corporation (as lessee) (Suite 100 facility)............................
10.38* Commercial and Industrial Lease Agreement dated November 1, 1996, by and
among James R. Neese, Terry Neese (as lessors) and Commercial Capital
Corporation (as lessee) (Suite 200 facility)............................
10.39* Stock Option Letter Agreement dated June 30, 1996, by and between T&W
Financial Corporation and Paul B. Luke..................................
10.40* Addendum to Stock Option Letter Agreement dated August 15, 1997.........
10.41* Stock Option Letter Agreement dated June 30, 1996, by and between T&W
Financial Corporation and Kenneth W. McCarthy, Jr. .....................
10.42* Addendum to Stock Option Letter Agreement dated August 15, 1997.........
10.43* Promissory Note dated August 19, 1997 by and between T&W Financial
Corporation and Paul B. Luke............................................
10.44* Promissory Note dated August 18, 1997 by and between T&W Financial
Corporation and Kenneth W. McCarthy, Jr. ...............................
10.45* Form of T&W Financial Services Company L.L.C. Operating Agreement.......
10.46* T&W Financial Corporation 1997 Stock Option Plan........................
10.47* T&W Financial Corporation 1997 Director Stock Grant Plan................
10.48* T&W Financial Corporation 1997 Employee Stock Purchase Plan.............
10.49* Employment and Noncompetition Agreement dated June 2, 1997, by and
between T&W Financial Corporation and James R. Neese....................
10.50* Employment and Noncompetition Agreement dated June 2, 1997, by and
between T&W Financial Corporation and Larry E. Rice.....................
10.51* Form of Management Agreement dated August , 1997, by and between T&W
Financial Services Company L.L.C. and P.L.M. Consulting Group,
L.L.C. .................................................................
21.1* Subsidiaries of the Registrant..........................................
23.1* Consent of Graham & James LLP (included in its opinion filed as Exhibit
5.1 hereto).............................................................
23.2 Consent of BDO Seidman, LLP.............................................
24.1* Power of Attorney (included on signature page)..........................
27.1* Financial Data Schedule.................................................
</TABLE>

- ---------------

* Previously filed.

<PAGE> 1

EXHIBIT 4.1

[T & W FINANCIAL CORPORATION STOCK CERTIFICATE]

FINANCIAL CORPORATION

INCORPORATED UNDER THE LAWS SEE REVERSE FOR DEFINITIONS AND A
OF THE STATE OF WASHINGTON STATEMENT AS TO THE RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS OF SHARES

CUSIP 87215N 10 7

THIS CERTIFIES THAT

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.01 PAR VALUE OF

T & W FINANCIAL CORPORATION

transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officers.

Dated

[T & W FINANCIAL CORPORATION SEAL]

/s/ [SIG] /s/ [SIG]

CHIEF FINANCIAL OFFICER CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER

COUNTERSIGNED AND REGISTERED:
TranSecurities International, Inc.
TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE

<PAGE> 2
The Corporation will furnish to any shareholder, upon request and
without charge, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights, so far as the same shall have been fixed, and
of the authority of the Board of Directors to designate and fix any preference,
rights and limitations of any wholly unissued series. Any such request should
be addressed to the Secretary of the Corporation at the principal office of the
Corporation.

The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -- as issuable in common
TEN ENT -- as tenants by the ????
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- __________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors
act_______________________________
(?????)
UNIF TRF MIN ACT -- _______ Custodian (until age ____)
(Cust)
____________ under Uniform Transfers
(Minor)
to Minors Act ______________________
(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ___________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------

- --------------------------------------

- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

- --------------------------------------------------------------------------------

- ----------------------------------------------------------------------- Shares
of the common stock represented by the within certificate, and do hereby
irrevocably constitute and appoint

________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated__________________________

X_____________________________________

NOTICE: THE SIGNATURES TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed

By
---------------------------------
THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANK, STOCKBROKER,
SAVINGS AND LOAN ASSOCIATION OR
CREDIT UNION WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM). PURSUANT TO
S.E.C. RULE 17AD15.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

T&W Financial Corporation and Affiliates
Tacoma, Washington

We hereby consent to the use in the Prospectus constituting a part of this
Amendment No. 1 to the Form S-1 Registration Statement of our report dated March
7, 1997, relating to the combined financial statements of T&W Financial
Corporation and Affiliates, which is contained in the Prospectus.

We also consent to the reference to us under the captions "Selected
Combined Financial and Operating Data" and "Experts" in the Prospectus.

BDO Seidman, LLP

Seattle, Washington

September 30, 1997