I get asked all the time about an equipment financing company (like mine) vs. the bank, and which is better. Of course, I think the equipment financing company wins hands down, but aside from my belief, I came up with ten solid reasons why an equipment financing company beats the bank if you are looking to finance or lease equipment.

I’ll list all ten in this post, and then go over these one by one in future posts – this gives me something fun to post about in between all my Section 179 cheerleading, and also gives you a reason to keep seeing Fletch.

To start, I want to make people aware of equipment financing companies, because many don’t know they exist. Usually, when a company needs money, they THINK they have three options – the bank, rich Uncle Chester, and Knuckles McNulty, who hangs around the pool hall. And of those, the bank is the most attractive.

But there’s a fourth option, and it’s the best of the bunch. An equipment financing / equipment leasing company exists solely to lend businesses money to acquire equipment. We’re better than the bank, and our offices are decidedly nicer than the pool hall (in fact, you can do everything online.)

And here are the ten reasons an equipment financing company is your best choice:

1. SIMPLICITY – We’re easier to work with than the bank.
2. UPFRONT COST – Our upfront cost is lower.
3. COLLATERAL – Our collateral requirements are less restrictive.
4. COMPENSATING BALANCE – We’re not going to ask you to keep a big bank balance.
5. FINANCIAL STATEMENT COVENANTS – We won’t pry into your ongoing finances.
6. PERSERVING CREDIT AVAILABILITY – Using an equipment leasing company allows you to still use the bank later.
7. HIDDEN CHARGES – there are none.
8. ACCOUNTINGANDTAX – Your accountant will love us.
9. RATE ADJUSTMENT – We liked fixed rates. The bank doesn’t.
10. RE-QUALIFY EVERY YEAR – We won’t ask you to prove your financial worth year after year.

I’ll go over these in more detail over the coming weeks / months. Look for them.

I know, I know, I harp on Section 179 all the time. I tell you to take advantage of it, or you may miss out. You read that so much here, you must think I’m a broken record (insert joke again about nobody knowing what that will mean in a few years…)

But seriously, I say it all the time – use Section 179 before it goes down, or even goes away. And while you’re at it, combine it with equipment financing to really get some bang for your buck. Over and over I say it, and I always warn that the gravy train may end.

Well, this time it did. Did you listen to me? Did you take advantage of Section 179 before the New Year? Because if you didn’t, you lost out. The Section 179 deduction WAS $500,000 for 2011. But you know how much it is in 2012?  $139,000. Yes, it went down that much (don’t yell at me – I had nothing to do with this – hey, I tried to warn everyone!)

But here’s the good news – that’s still a heck of a deduction. And it’s for 2012 only. In 2013, Section 179 is scheduled to go down even MORE – all the way down to $25,000. And it’s an election year – the politicians have a lot more to do this year than worry about amending Section 179, so there’s a good chance this is going to stay just like it is (in these times, with things like Occupy Wall Street going on, do you think business deductions will be all that popular with people? I know Section 179 is a good thing, but it can easily be twisted to be seen as helping wealthy people – after all, it’s still sometimes known as the “Hummer Tax Break”.)

So here’s my advice – take advantage of Section 179 THIS year. Don’t miss out again. Call an equipment financing company, get yourself an equipment lease, buy some equipment, and write it off. Take advantage of the six-figure tax deduction while it’s still here.

Have a great day, everyone!

If you follow my blog here at “The Lease Guy”, you know Fletch likes to predict things every January. Of course, none of my predictions come true, but hey, that’s just semantics. And as Mrs. Fletch will attest, I am a stubborn guy – one of these days I will get it right. So this has nothing to do with equipment financing, equipment leasing, or Section 179 (ok, that last part is false – I do mention section 179 later).

Ok, let’s predict sports first, because we’re all still in a sporting frame of mind. For the Super Bowl, I see… the NY Giants. I know, I know, a lot of you think I’m nuts, and that Green bay or New Orleans will win – I say no, and Eli Manning will throw another crazy pass, and the NY Giants will win. Mark my words.

The NHL will see The NY rangers… I know, a NY double dip (sorry), but I don’t see anyone playing better than they are, and they will have the hot goalie.

In basketball, you just have to go with Miami. They’ll learn how to play together this year and bring it home. And Baseball… I’m going to go out on a limb and predict the LA Dodgers return to glory this year.

We have a HUGE political year this year – it’s time to elect a new President. I did not predict the last election, and I won’t this one. I just don’t get too involved with politics. But ok, you look to me for advice, so I’ll say something here: a republican or a democrat will win. I’m “all-in” on that one.

But let’s talk the economy – We had a good holiday shopping season (so the retailers tell us). That’s usually a decent indicator of the national mood. And it would appear the national mood is rising ever so slightly. It’s about time – the doom and gloom of the last few years is starting to thaw ever so slightly. Let’s hope that continues.

The Mayan calendar predicts the world will end on 12/21/2012. I’ll go out on a limb and say I disagree. But I will say that I predict “some” kind of earth-shaking event. We’re getting close to finding some type of microbial life on other planets – maybe that’ll be it. Or some kind of discovery. But there will be “something” big.

And there’s your 2012. Now go to Vegas and throw a few bucks on the Giants – you just can’t lose!!!

I have to do this one more time, and remind you that the Section 179 clock is about to expire on 2011. Once that second hand sweeps past Midnight on 12/31/2011, it’s over, and we’re then into the 2012 Section 179 season.

So here’s what this means – if you want that fat Section 179 tax deduction to bolster your 2011 bottom line, you only have a few days left to buy your equipment and get it into service (that last part is key – you can’t buy the equipment now, then let it sit while you indulge in holiday celebration, meaning to unpack it the first week of January. If you do that, it’s too late.)

I’ve posted before about businesspeople frantically spending money on 12/31 to take advantage of Section 179, but I really don’t advocate that. You should do it a little earlier. Like right after you are finished with this post.  This gives you enough time to buy your equipment, and put it into service. It also gives you enough time to arrange for equipment financing or an equipment lease (which, as readers of this blog know, combined with Section 179 is a powerful profit-booster.)

Section 179 is big enough to make a difference for 2011’s year-end numbers, too. With the maximum deduction at a very generous $500,000 (that’s 500k, or a half mil, if you prefer slang), many companies can turn red ink to black by using this deduction. And with the economy hopefully gaining a little steam (reports of holiday sales are indeed encouraging), making 2011 better can be a very attractive option in a big-picture sense. Also, while Section 179 seems to be set for 2012, things could always change (it is an election year, after all). So making 2011 better (striking while the iron is hot) is probably a good move.

Anyway, I’m off for some holiday cheer. I hope you have a great holiday season, and we’ll talk again in 2012.

Leave it to me to see a connection to equipment financing from pretty much any news story.

In hearing and reading about occupy Wall Street and other protests, it struck me that a lot of what the people are saying is we lost “good jobs”, and that they want them back. I totally get that sentiment, but I do fear it’s misplaced – those jobs are not coming back. Let me explain why (and tie it into equipment leases and the like.)

See, there was a time when assembly line work and factory jobs paid well, because workers were needed for them. But that was times past, and it’s not coming back. Why? Two reasons: the first is, global labor is cheaper (and we can go on and on about that – no opinion here on whether that’s right or wrong – I’m just saying what “is”.)

But the second reason is one I saw coming a MILE away – the amount of labor that was needed years ago is simply not needed anymore. Bigger and better robotics and manufacturing machines have replaced thousands of workers. Where it used to take ten people to run the machines to make a widget now likely takes one person (whose job is to turn a bigger machine on or off.) And through computers, that one person can probably run ten such machines.

I know about this because I finance equipment (well, my company does). I see what’s happening out there, and what’s happening is companies are leasing equipment that does jobs that once took ten, twenty, fifty (etc) people to do. Now again, I am not saying that this is a good thing for everyone – it just “is”, and is something that we have to get used to. Because if you owned a manufacturing company, would it not make sense to buy or lease equipment that makes producing your widget easier (and more economical?) Of course you would.

And that’s about as political as old Fletch gets!

I was talking to one of our salespeople (Ronda) the other day, and she told me that one of her prospects didn’t even want to talk about offering credit because he thought it would be “too complicated”. I was partially surprised, because since I work for an equipment financing company, I know how simple it can be. But I’m not so surprised either, because, to the outside world, it would seem complicated.

But really, it’s not, and I figured I’d mention this here in the blog (I already touched on this a bit back when I wrote about offering equipment financing can raise sales, but I’ll go a little deeper here today.) On that thought, I also wrote about different “vendor-lender” equipment financing relationships, and yes, some of them CAN get complicated. But we won’t get into those either.

At a basic level, offering equipment financing and equipment leases to your customers is as simple as us putting a link on your website (for those that read some of my older blogs, this is also called a “referral program”). Just a link. That’s it. No muss, no fuss. No work on your end, no interest rates, no spreadsheets, and no sending Bruno out when people don’t pay. All you do is enjoy increased sales because your customer can get financed. We even work with your customer directly – you’re really no more involved than you were if they were paying cash. Well, you’ll probably be a LITTLE busier, because like I’ve been saying, offering credit DOES increase sales.

There’s not even any real work involved in putting up the link. No shopping carts, no databases, no javascript… just a link. We can be in and out in two minutes flat – we’ll talk about the weather longer than we’re working putting up that “get equipment financing here” link.

Anyway, there you have it – offering credit is simple. So Ronda, go ahead and point your customers to this blog so they can read for themselves how easy it is. And Bruno, settle down – we’ll find something for you to do soon!

I know I talk about Section 179 quite often, but now it takes on a little more significance, because the year is almost over.

If you’ve read this blog at all over the years, you know Section 179 is a year to year thing, ending on midnight, December 31. When that clock strikes 12, your equipment must have been not only bought, but put into use. Hey, some people ring in the New Year with Cheer… others are setting up office equipment at 11:55pm to get a fat 2011 deduction.

But if you act now (goodness, now I sound like a bad late-night TV commercial), you can have your cake and eat it too. Get your Section 179 eligible equipment / vehicles / software NOW – before the year runs out – and you’ll be able to attend that New Year’s party without guilt, secure that your 2011 is the best that it can be in terms of tax savings and deductions.

The great thing about Section 179 is you really don’t need to do anything special, save buy equipment that makes your business better. Most companies would have done exactly that anyway. For example, would new computers and software make things easier? Then buy them now, and take advantage of the tax savings for the 2011 fiscal year. How about vehicles, or office machines, or a new <insert whatever equipment you use to make your product / produce income>? You can get them all, and save big on your taxes.

And, of course, unless you’ve been under a rock, you know that Section 179 has been made bigger for 2011, making it even more important that you beat the deadline. I have the numbers listed out in a previous post (I could think of worse ways to spend an afternoon than going through a few Fletch posts), but to recap in a nutshell, the maximum deduction is now a full $500,000, and the total amount of equipment bought is up to two million dollars. This means thousands of companies can really impact their 2011 tax bill by taking advantage of Section 179. Throw in a little equipment financing, and you’ll be dancing on the tables come 12/31! Maybe I’ll join you (and then again, maybe not!)

Ok, in our little vender / lender equipment financing relationship series, we’ve come to the final one – captive programs. If you recall, the first three were Referral Programs, Private Label Programs, and Vendor Recourse programs.

Also, if you’ve been following along, you’ll also notice they all have an increasing amount of vendor responsibility and risk. A referral program, while effective in increasing sales, is a very basic relationship, and carries little to no risk on the vendor’s part. In fact, it’s essentially a vendor putting our link on their website and saying “get your financing here”, where today’s topic – captive programs – involves the vendor acting as a quasi-finance company.

Captive programs are the hardest type of equipment financing / equipment leasing programs to describe, as they can take on all manner of individual aspects. No two captive financing programs / situations are the same (you fellow equipment leasing guys already know this.)

Essentially, here’s how a captive program works:

You have a vendor who wants their own finance company to help sell their product.

WHY would they want this? Because they generally want to control the yay/nay aspect of the transactions. They might want to do this because their product / industry is volatile, or perhaps they want to take more risks to get more of their product in the market.

A good example of this is GM and GMAC (when GMAC existed). GMAC was created to provide financing to GM automobile customers, and, especially early on, provided less-stringent lending criteria than a traditional bank. GMAC helped GM become, at the time, one of the largest companies in the world.

That’s just a very clear example of what a captive program can look like. But it’s likely GM funded GMAC themselves – usually, captive programs don’t quite work like that, and manufacturers come to a company like mine for help. Here’s how that works (again, in general).

A manufacturer decides they want a captive program. They create a subsidiary to act as the finance company. They also put in an influx of cash, as it’s expected defaults will be higher than normal. This cash is a reserve. Then, a company like mine funds the loans (loans we might not make otherwise), with the reserve protecting us against loss.

In a nutshell, that’s it. Here are a few other points about captive programs:

• Usually, the type of equipment financed is equipment that can be quickly resold in the case of default / repossession. Thus, a Captive Program really won’t work well with electronics / technology equipment that gets outdated quickly.
• Captive Programs are often seen as Loss Leaders. More often than not, they are expected to lose money for the company. The upside is greater market share, which can be exploited for profit later.
• You don’t see all that many captive programs out there. For many companies, Vendor Recourse is as far as they want to go. And I don’t blame them – captive programs should really only be considered if the increased market share will be deemed worth it.

Ok, there’s our four vender-lender equipment financing relationships. These were fun to write, as they allowed me to answer some common questions. But now, let’s get back to Section 179, because the end of the year is creeping up on us.

I’ve talked before about how offering credit / equipment financing can actually be a form of marketing, and I’d like to return to that today. Because today, with the economy fairly stagnant, offering equipment leases / payment terms might very well set you above your competition.

Let me tell you a quick story. When I was a kid, I had a friend named Joey. Joey’s father always got cool stuff in the mail – I’m talking stereos (although Joey’s bell-bottom-wearing dad called it a “Hi Fi”), bikes, all kinds of toys, etc. Now, my family got stereos, bikes, and toys too, but we went to the store to get them. Joey’s family got them through the mail, which to my mind, was really, really cool.

So why didn’t Joey’s family get their stuff at the store? I found out later it was because his father did not have great credit, so they didn’t have a regular credit card like everyone else. However, his father DID have a credit card with a certain mail order company that specialized in giving credit to people who had trouble in the past. The catch was, you could only use that credit with them, and in their catalog. You could use their card to peruse their catalog and buy a lava lamp (to go along with your HI FI, I suppose), but you couldn’t use it to buy dinner at a restaurant. Talk about good marketing…

The point I am trying to make here isn’t about bad credit or what silly 1970’s-era people called their stereos. It’s the fact that Joey’s father chose to shop with a company simply because they offered him credit. It’s a big deal.

I see this kind of thing every day in equipment financing. Not so much in the bad credit aspect, but in that companies repeatedly choose to buy equipment from vendors who offer a payment option. In many cases, it tips the scale.

Think about it – you’re a company, and you are looking at six machines that cost 30k each. You can go to vendor #1, who does not offer equipment financing, or you can go to vendor #2, who does. Everything else is equal, save for the financing. In most cases, vendor #2 will sell more equipment, simply because they allow their customers an easy way to acquire it, without depleting their cash reserves, and without jumping through hoops at the bank. Again, I see this over and over – offering a simple payment option increases sales. And you know what? It’s really easy – you can literally offer a payment option on your website in ten minutes. Talk to your friendly equipment financing guy (me or someone like me, only not as charming), and ask about it.

Now I have to go, because I saw a sweet deal on a used Boom Box.

With the title Equipment Financing Approval – by the numbers you might think I’m going to give industry approval ratings in terms of equipment financing deals (which, by the way, are higher than our president’s approval ratings!)

But I’m not – in fact, as an overall number, the amount of businesses accepted is not very useful (there are just too many factors involved.) What I AM going to talk about is the fact that equipment financing approval (or denial) is generally based on numbers, and not emotion. It’s really the only way we – as an equipment financing company – can do things.

This all came about in my head from a recent post on vendor-lender equipment financing relationships. Specifically, the post on vendor recourse programs. The general gist of the post was it’s a relationship where a manufacturer assumes some risk because they feel it’ll be profitable to them. Perhaps it’s because they feel they will move enough product to offset any defaults, or maybe they know their industry well enough that they think their product will help customers bounce back, etc. Either way, in this relationship, they accept some risk that we will not.

Think about that last statement for a second… my equipment financing company, simply from looking at the numbers (years in business, income, liability, credit history, etc) will say “no”. But the vendor wants to step in and say “yes”.

Sometimes, they say “yes” due to margin – they make enough profit on the sale that the “default rate” won’t matter. That’s ok – it’s still going by the numbers.

However, other times, it’s not. Instead, they feel their customers (or their industry) will buck the normal trends and default at less than the predicted rate. They are going by MORE than the numbers – they are going by emotion. Which, as a lender, I can tell you is a pretty bad way to go about things. It’s like loaning money to your brother-in-law to get his impounded car back… how do you think MOST of those transactions worked out?

Now, I’m not saying this is necessarily bad, mind you. But if you lend money to people whose numbers say “don’t lend”, they will almost always default at a fairly predictable rate (yes, shockingly, even brother-in-laws with impounded cars!) I mention this because I can’t tell you how many times I’ve seen a vendor recourse program result in the vendor being “surprised” at who doesn’t pay. But the numbers don’t lie.

This doesn’t mean we never put emotion into a decision – sometimes, you just have to go with your gut. But some thought is definitely required in figuring out which brother (in law) we can spare a dime to!