This may not seem like a big deal on paper, but in the real world, it is positively massive. And I know this firsthand.

Before we launched this program, I called around to see if anyone would do this. I called financing companies, banks, you name it… and I was very specific: I wanted to finance a business-use SUV in my company name. 

I did not want a personal loan. I did not want a business blanket lien. I wanted to finance an SUV, except on the loan paper I wanted my company name first instead of mine. 

The answer I got was the same everywhere: NO.

I was offered plenty of personal loans. I was offered a large business line of credit by a few big banks, or financing for an entire fleet. But nobody would do what I was asking for – a single SUV financed in my company name.

So to us, it seemed like a niche that needed filling. Because we’re asked about this repeatedly. We got to work.

Right away, we found out why nobody offers this: it’s a nightmare. I don’t want to bore you with the details (because they are boring), but all lenders have bosses, and those bosses are not comfortable with small businesses being the lead borrower on paper for an SUV or two.

To overcome these issues, we had to significantly raise the credit requirements for this program. That proved satisfactory, and the program was launched.

This means if you meet the elevated credit requirements, you can finance a business-use SUV in your company name. Sweet, right? 

We worked hard to offer this program, and we hope it helps some companies. Click the above link to see the details.  

Most of the questions are tax-related, and we can’t give official tax advice. But there are tax deductions for partial business-use vehicles, and most of them follow the same rules, which I’ll outline here.

The big rule is how much “business use” the vehicle will be subject to. And the threshold for most instances is a minimum of 50%.

This means the vehicle must be used for business at least half the time for it to be considered a partial business-use vehicle in most cases.  

So what is business use exactly? It’s when the vehicle is used for business purposes. In cases of pickup trucks and SUV’s, it’s pretty clear – jobsite use, hauling materials, going to and from jobs to quote, check on the crew’s progress, etc. However, it is NOT bringing your kids to Little League, even if your company did sponsor an outfield wall sign (and good for you in doing that!)  

It gets a little murkier when it comes to larger SUV’s and even passenger vehicles. The same 50% rule applies, but in many cases, business use is a little ambiguous. Is picking up business supplies as well as household groceries business use? That’s for the IRS to answer, not me. But I will say that’s probably not a fun conversation at the audit.

One thing that’s very clear though: a typical commute is NOT business use. Even if you own a company, the time commuting from your home to the physical office is not business use. 

Lastly, size does matter. Nearly all 50% partial business-use vehicles are eligible for some type of deduction, but the larger ones get the bigger deductions. 

Ok, that’s about it on the rules for partial business-use vehicles. I hope it helps, and that the biggest takeaway  is “ask your tax professional”. 

But just “why” do you need a commercial auto policy for a business vehicle? Here are a few reasons:

• Coverage limits are generally higher. And you need them to be higher. Monetary/liability-wise, your personal policy protects your personal life (your house/etc.), but if everything goes as planned, your business should be worth more. People also love to sue businesses. So there’s that.

• Coverage for employees driving. This is important – your personal policy likely will not cover employees driving the vehicle. A commercial policy should (note: all of these are general statements and suggestions – your insurance professional has the final word). 

• Last post, I mentioned my friend’s trailer accident had a lot of gas spillage. Luckily there was no issue with that, but what if there was? What about other cargo you may be carrying? Is any of it toxic? What happens in the event of an accident? A commercial policy can (and should) include coverage for this.

• On the subject of business cargo, either yours or someone else’s… who covers that in the event of an accident? I promise you your personal auto policy won’t. 

• Let’s say you and your employees go to a convention on business. You rent a car. There’s an accident. The rental company’s policy is bare bones and woefully inadequate. Your personal auto insurance policy says “well, you folks were there on business… talk to the company that sent you there”. A commercial auto policy for your business can cover this (again, talk to your agent regarding the details.) 

There are a lot of other reasons why a commercial business vehicle policy makes sense. But the proceeding should give you a good idea on the basics. 

Happy driving!

Let’s back up about 15 years – my buddy decided to start a landscaping business, and like many others, basically went the DBA route. One day he was a regular guy with a regular job, and the next he was a business owner. He already had a pickup truck, he borrowed a small trailer from his father, bought a mower and some other equipment from a big box retailer, and went on his way.

Later that summer, he was doing decent, and took on a part-time helper. One day, he sends the helper to the store to get something they needed… and there was an accident. Someone ran into the trailer, gasoline (two 5-gallon containers worth) was everywhere, and some of the hand tools were destroyed (luckily the mower was not on the trailer.)

Turns out it was the other driver’s fault, and the insurance companies worked it all out, but then he got a call from his insurance agent. Basically, they told my friend he was super-lucky. Since the other driver was at fault, their company ended up paying, but if the tables were turned and my friend’s helper was the one at fault… well, that could be an issue. 

See, my friend, like tons of other small DBA-type companies, used his personal vehicle for business. But, unknown to him, he was taking a massive risk – he never got a commercial / business vehicle policy. And the insurance company has little interest in paying out when a personal vehicle is used for business and there’s an incident (never mind the employee driving it). And honestly, you cannot blame them.

For any business vehicle, there are two things that are almost non-negotiable: the vehicle should be registered in the company name, and it must be insured with a commercial policy.  For the record, Crest Capital ONLY works with companies in business for at least two years and will finance the business vehicle in the company name, as well as register and insure it that way as well. This way there are no issues or surprises.

Remember: you don’t get to buy insurance after the fact. When there’s an incident, you either have it or you don’t. No do-overs.        

In the next post I’ll discuss a few details about business vehicle insurance that companies should know about. But for now, just know that you must have it. Anything less is taking too big a risk. 

Time was when equipment financing was ALL paper-based. You filled out a paper application, you usually got an answer via another piece of paper, if you were approved everything was put on paper for you to sign, and a paper check was cut.

And that’s if you used us. If you went to the bank instead, you can add the years of financial statements they’d want to see (all paper). 

And this is still true today – we hear from customers all the time that the bank wanted a hard copy of an old tax return that was long since filed under “we’ll never use this again.”  

Contrary to that, we’ve made everything virtually paperless. And simple. Here’s how:

• You can find out if you’re likely to qualify for equipment financing right from our home page. It’s fast and free. 

• You can get an equipment financing payment quote online.

• You can apply for financing online. Oh, and for any financing under 250k, you don’t need any paperwork or financial statements. We can give you an answer electronically too. 

• You can electronically sign your finance agreement.

• We can EFT the funds to your equipment vendor.

See a theme? NO PAPER.

Of course, we can do paper if you want. There are many customers that would prefer a hard copy to read and fill out, and we completely understand that and accommodate them.

That said, the best part about paperless (besides the obvious) is the speed involved. We’ve always been fast, even when we used paper for everything, but the speed has markedly increased with fewer “paper steps”. The above bullet-pointed list can be accomplished in about a business day, and that’s only because banks typically take that long to wire funds. 

We’re proud of reducing the paperwork needed to finance equipment, and will always continue to innovate. Maybe in 20 years, a few clicks, and a drone shows up with your new equipment. We can dream!  

Mrs. Fletch and I were shopping for a vehicle awhile back, and we were undecided on whether we should buy a new or a used car. There were plusses and minuses to each, so we decided to look at both. We went to the local dealership, test drove a new vehicle or two, and then asked the salesperson “can we see some late model used cars?”

Much to my surprised, our salesperson committed the ultimate salesperson sin. He said “no”.  However, before I could pick my jaw up from the floor, he followed it up with “we don’t have USED cars – we have PREOWNED cars”. Which he then proceeded to show us (funny – they looked just like used cars to me).

It got me to thinking how the term “used” has changed over the years. I realized that I never seem to hear about anything “used” advertised anymore. It’s always “preowned” or some such thing. And in the event something IS called “used”, it’s preceded by the word “gently”. I wonder how they know that? What if it was owned by a family with a 20 year old? As a former 20-year old male, I can assure you that we are not gentle on vehicles.

Regardless, I find it interesting. And it gives lenders a quandary over what to say – should we say we offer used equipment financing? Or preowned equipment financing? How about gently used equipment leasing? They are all valid. Or maybe we should say we finance private party equipment sales (private party sales being a common business term.)

There’s no real lesson here except that the changing nature of the names is interesting to me. And yes, I do learn. The next dealership we went to I asked for the preowned cars, only to be told “we don’t have those – we only have CERTIFIED PREOWNED AUTOMOBILES.”

Some things never change.

Do you know why it doesn’t get all that much press? Because there aren’t a whole lot of lenders that embrace used equipment financing. And since I work for one of the few who do, I’m almost puzzled as to why (note: long time readers know I never really plug “my” company in this blog, but based on my URL, it’s not hard to figure out where I work. But to be honest, I’m proud to work for one of the few equipment financing companies that do this, so I don’t mind mentioning it.)

But really, what’s the deal with this? Used equipment financing shouldn’t be hard to find. So why is it? Is it because used equipment is… well… used? I don’t understand that reasoning. Sure, there are plenty of “held together with duct tape” machines out there, and yes, nobody (not even my company) will want to finance those. But in this day and age, that’s almost the exception – there are countless pieces of used equipment out there that have years and years of life left. Many machines, vehicles, and other pieces of equipment are made exceptionally well these days.

And that’s leaving out equipment that doesn’t have moving parts. Do you know how long a desk can last? A loooong time. In fact, the desk I’m sitting at now will almost certainly outlast me (note to my boss and Mrs. Fletch: don’t get any funny ideas!) But things like desks, conference tables, cubicles, shelving… all of those things have a robust secondhand commercial market. And a robust used equipment financing company helps quite a bit.

One last note: Section 179 is fine with most used equipment. So not only can you get used equipment leasing / financing, you can also most likely take a deduction on it.

Ok, I’m getting nervous. Time for a new desk.

The FMV in FMV Lease stands for “Fair Market Value”. It’s also sometimes known as a “true lease” in business circles, probably because this structure was likely the original thought behind leasing.

An FMV lease is where a company leases a piece of equipment for a specified period of time, and at the end of the term, has several options, one of which is to purchase the item at “Fair Market Value” (the other options are usually “return the equipment” or “re-lease the equipment”).

So why would a company want an FMV lease? There are several reasons:

1)     A company is leasing equipment that rapidly depreciates in value. Vehicles often fall under this, as does technological equipment. Also, if a company fears the “new and improved model” is right around the corner, and their leased equipment will be obsolete soon, a FMV lease makes sense if they need the equipment now.

2)     Of course, like many other leases, the payments on the FMV lease are tax deductible, and the equipment is not on the company’s balance sheet.

3)     Because the lessor is guaranteed “fair market value” for the item at the lease end (either if the lessee decides to buy it, or they return the equipment and the lessor sells it secondhand), the lease payments are lower than other leases (like 10% Put or $1 Buyout).

Your lease payments are generally determined by what the lessor feels the value will be at the end of the term (which may or may not be 100% accurate). So in essence, you are paying for the value / life of the equipment that you actually use, and that’s it.

And there you have it – the FMV lease in a nutshell. Next up in our lease series is the TRAC lease. Stay tuned.

To first set the stage, I was recently discussing vehicle leasing and financing and similar, and what type of vehicles an equipment financing company finances. And “finances” is the optimal word when it comes to vehicles. These days, companies like mine sometimes shy away from outright leasing vehicles, preferring to finance them instead. Why is that? Because in a typical lease, the leasing company is listed as the registered owner. In a vehicle financing deal, the company that is purchasing the vehicle is listed as the registered owner. This is a big difference.

First of all, most companies actually want the vehicle in the company name. Taxes, assets, etc. It just works better for most companies that way. But the second reason we’d rather finance than lease vehicles is the liability factor, which brings me to the recent phone call.

We got a call from a sheriff in Virginia who was looking to collect on a parking ticket. Well, we’re not in Virginia, so at first, we were a little puzzled. Then it becomes clear that the parking violation was made by a client of ours, in a vehicle leased to them. Technically, we’re the “registered owners” of said vehicle. So when our client (mistakenly, of course) forgot to pay the parking ticket, we got the call. The happy end is things got straightened out, our client paid the ticket, and all was well. But it illustrates why an equipment financing company would rather not get involved in leasing vehicles (at least common leases. We do engage in TRAC leases [terminal rental adjustment clause], but discussing that is an entirely different post, or series even).

Hope you are all enjoying your summer.

So that begs the question – just what kinds of vehicles DO equipment financing companies lease and/or finance? “Just about everything else” is the correct answer.

Really, the list of the types of vehicles that we do finance or lease is long indeed. In fact, you’d be hard pressed to call many of them “vehicles” in the classic sense, because you won’t see them on the road all that often (and if you do and are stuck behind one, you might be cursing the 20mph cruising speed many of these travel at!)

But let’s see… we have dump trucks, road graders, cranes, bucket trucks / cherry pickers, road pavers, steamrollers, septic pump trucks, oil delivery trucks, ambulances, cargo vans, large courtesy vans (like those used for a hotel), limousines, cube vans, glass transport trucks, street cleaners, cement mixers… that’s just off the top of my head. I’m leaving off a ton of things.

Then we get to trailers and similar. We finance lots of those. And “pull behind” accessories, like wood chippers, trailer-style generators, and similar. We also finance a lot of trucks, like smaller delivery trucks, all the way up to 18 wheelers. But here’s an interesting tidbit – we don’t finance 18 wheelers for transportation companies or owner operators (because that’s more or less fleet financing, which we don’t get involved in.) But if you’re a manufacturer who wants their own delivery truck, we’re good for that.

As you can see, there’s a lot to business vehicle financing and leasing. We have three posts on the subject now, and there’s room for one more – next time, we’ll talk about the reason why it’s advantageous to go through an equipment financing company.