Transcript Financial Solutions for Growth… Equipment Financing Why Choose Financing? • • More companies acquire equipment through leases than loans Businesses recognize the value of equipment comes from its use,

Financial Solutions for Growth…
Equipment Financing
Why Choose Financing?
•
•
More companies acquire
equipment through leases than
loans
Businesses recognize the value
of equipment comes from its
use, not necessarily it’s
ownership
80% of businesses finance
30% of assets acquired are financed
Reasons Companies Finance
Maintenance
13%
Tax
Advantage
9%
Cash Flow
35%
Flexibility
13%
Latest
Technology
13%
Dollar Value
17%
Benefit from Equipment Use
•
•
•
•
With financing, your
business need only cover
the monthly payment to be
profitable
Businesses profit
immediately from
equipment use:
Better, high-end equipment
for minimal change in
monthly payment (avg. $20
increase for every
additional $1000 financed!)
Lease payments are a
100% tax-deductible
expense for your business!
• Example:
Consider the productivity of new equipment
and an affordable $500 Monthly Lease
Payment (Usage/Rental Fee)
Daily Cost of Equipment
Monthly payment $500  by 30 days = $16.67/day!
Hourly Cost of Equipment
$16.67  by 8 workday hours = $2.36/hour!
Benefit from Equipment Use
•
Flexible financing options permit you to structure your lease in the most
convenient manner for your business.
–
Not having to come up with cash for “soft costs” means no large outlay of cash.
Item
Description
Amount
Financed
You determine (may include soft costs)*
Lease Term
12, 24, 36, 48, or 60 months
Down Payment
0, 1, or 2 payments or 10% down
End of Lease
Option
$1.00 Buyout (Non-Tax Lease)
SD=Buyout (Non-Tax Lease)
10% PUT (Non-Tax Lease)
10% Option (Tax Lease)
Fair Market Value (Tax Lease)
Soft Cost Examples*
Training
Installation
Integration
Sales Tax
Freight
20-30% of entire
funding amount may be
in soft costs.
Two Types of Leases
• For IRS purposes, a lease is either a:
Tax Lease or
Non-Tax Lease
• Each has different tax benefits and end of lease
options
Tax Savings: Non-Tax Lease
Non-Tax Leases: Attractive to companies that want the tax benefits of ownership
Lessee purchases equipment upon lease termination at a pre-agreed amount: $1.00
Buyout, 10% PUT, SD=BO, or EFA (Equipment Finance Agreement)
Tax Benefit: Accelerated depreciation using IRC Section 179 in year purchased and put in
use and interest write-off throughout the life of the lease
Financed Amount
$125,000
1st Year Section 179 Write-off:
$102,000
($102,000 is max. write-off in 2005)
Normal 1st Year Depreciation
$4,600
($125,000-$102,000=$23,000x20%*=$4,600)
*Depreciation calculated at 5 years=20%
Total 1st Year Deduction
$106,600
($102,000 + $4,600 = $106,600)
Tax Savings Assuming Rate of 35%
$37,310
($106,600 x .35 = $37,310)
Cost of Equipment after 1st Year Tax Savings
($125,000 - $37,310 = $87,690)
$87,690
Tax Savings: Tax Lease
Tax Leases: Attractive to companies that continually update equipment
Lessee wants use of equipment without ownership and may return it at lease-end
Tax lease is not considered debt and does not appear as debt on the tax return, making
the lessee’s balance sheet more attractive to traditional lenders
Tax Benefit: Deducting 100% of lease payments as an expense lowers a businesses'
taxable income
Monthly Lease Payment
Lease Term
Total Amount Financed
Monthly Tax Savings
$1,000
36 Months
$36,000
$350
($1,000 lease payment x .35 tax rate =$350)
Tax Savings Over Life of Lease
$12,600
($350 x 36 months = $12,600)
Cost of Equipment After Tax Savings:
$36,000 financed–$12,600 savings=$23,400 vs $36,000
$23,400
Lease Versus Cash
Time Value of Money:
The value of money based on where/when it’s invested.
1. CASH: Consider investing $25,000 in a 5 year investment with an average
return of 8% (second example shows 15% return). After 5 years, the $25,000 =
$36,733 or $50,284 with a 15% return.
2. LEASE: In comparison, finance $25,000 in equipment via a five year lease
with a monthly payment of $517.50 and an end of the lease option of 10%. The
cost to lease, not including the 10% option is ($517.50 x 60) = $31,050.
Time Value of Money
Lease versus Cash
8% Return
15% Return
$36,733
$50,284
Cost of Leasing
($31,050)
($31,050)
Gain by Leasing
$5,683
$19,234
Cash Investment
Financing Will Boost Your
Business!
Conclusion:
• What are the most important things to remember in the
previous examples?
•
Equipment financing is vital to a company’s cash flow, tax situation, and bottom line
profits.
•
With financing, you can cover the complete solution to your needs including “soft
costs” such as installation, training, shipping, sales tax, etc. where a loan may fall
short, leaving you to come up with a large cash outlay.
•
Financing allows you to acquire better, high-end equipment for minimal change in a
monthly payment
•
Businesses recognize the value of equipment comes from its use, not necessarily it’s
ownership
•
Lease payments are a 100% tax-deductible expense for your business!
Equipment Financing by
Nationwide Business Credit, LLC
Contact Nationwide Business Credit, LLC today and begin our
simplified application process to get the equipment you need for
your business!
Contact:
Justin Pearce
Nationwide Vendor Accounts
9861 Irvine Center Drive
Irvine, CA 92618
[email protected]
www.nbc-llc.com
800.770.3638 | Toll Free Main
800.455.9108 | Toll Free Fax
949.681.8891 | Direct
949.681.8886 | Fax