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”. 

As you well know, over the last 18 months, the Federal Reserve has been steadily raising rates. This year they paused in June, raised them 25 basis points in July, and paused again in September. But their September comments were somewhat hawkish, as they alluded to how stubborn inflation is, and the need to stay higher for longer.

The next meeting is in November… and what can we expect? Well, unless economic data changes (and it could – more on this in a second), most experts predict another 25 basis point increase. 

The good news here is that those same experts predict that is likely to be it. And that maybe some cuts could happen at some point in 2024. Now we can’t get too excited about that, because even if cuts do come, they will almost certainly come sloooowly, likely 25 basis points at a time. So the rate we’re seeing right now is likely to be very close to the rate we’ll be seeing in a year. 

**Key takeaway for that = don’t let rate expectations drive your near future decisions. You’re not going to miss out on a significant rate drop.    

Now, I did say “unless economic data changes”, and this is where I’ll make a prediction – we will see economic data in the near future that shows the previous rate cuts are (finally) working. 

This is gut feeling, but I’ll bet you share my feeling: all the data I’m reading says the economy is strong and things are just swell… but does it feel that way to you? I’m seeing a lot of spending by older folks for sure, but younger people? Not so much. And I feel this will be reflected in future data. 

Does that mean a November pause as well? I sincerely hope so. As a B2B lender, I hear small businesses loud and clear: they want lower rates, and they want them now. I just hope the Federal Reserve is listening. 

So that’s my optimistic outlook – hopefully a November pause, but if there is an increase, it’ll be 25 basis points. Then a long period of nothing. Then maybe, just maybe, we start to see some small cuts later next year. 

Stay the course folks.

He was asking about this because he was already turned down by another equipment financing company due to the vehicle’s age. He wanted to finance a very good condition 2018 work truck for five years, and was told it was too old, which surprised him. Was 2018 really THAT long ago?

I told him I had bad news and good news. The bad news is almost every equipment financing company out there uses the exact same formula – they want the loan term and the vehicles’ age (in model year) to be equal to or less than seven years.

So right now, in the spring of 2023, most lenders will only let you finance a 2020 model or later for five years. The 2018 model mentioned could only get a three-year loan from another lender (note – if the math seems off by one, it’s not – we’re simply not counting the current year twice).

Now here’s the good news – Crest Capital is one of the only business lenders that will consider financing used vehicles without a hard age cap. Instead, we’ll look at each used vehicle financing deal on its own merits, without a pre-defined age formula. In the case of the emailer, his vehicle passed our internal criteria, and we felt comfortable financing it for five years, which we did. 

By their very nature, business vehicles usually age pretty fast, so the “seven years” formula is not really out of bounds. But as a small business lender, we feel it’s a better service to our customers to look at a used vehicle financing deal with a little more personal touch. Many times, a used vehicle three / four / five years old is still a very viable vehicle with many years of useful life left, and an excellent value for the buyer. And if that’s the case, we’re one of the only equipment financing companies that will consider financing it for five years.    

After all, like all of us getting older say, “age is just a number”. 

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. 

2022 was the year of inflation and interest rate hikes, both of which I’ve discussed at length in this blog. But there’s no getting around it – high inflation and rising interest rates (which are rising to combat said inflation) have affected every business out there. 

So with that in mind, here are a few year-end strategies that can help your 2023 start off right. 

1. Remember That Rates Are Likely to Keep Rising

I’m confident that the rates we have right now will be lower than any rate we see in 2023. Hopefully we won’t see several 75 basis point increases in a row anymore, but the scenario of “no 2023 increases” is extremely unlikely. And decreases are even more unlikely. 

This means you really can’t afford to hold out for lower rates if you need to replace machinery or make improvements. Because you will be holding out for a looong time. Which brings me to… 

2. Do More Than Your Competition.

Think about cyclists racing – the prevailing thought is you separate yourself from others on the difficult hills, and not the flat ground where it’s easy to ride. It’s the same right now for businesses.

In a booming economy with low rates, everyone can be a competitor. But it’s in the more difficult economic times that companies really make strides and pass others. Let everyone else turtle because rates went up a point or whatnot. Demand is still strong for most industries, and the companies that can best meet that demand will be the winners once the economy turns (and it always turns).  

3. Don’t forget your Section 179 deduction. 

Listen, I know taxes and “the IRS” are the last things you want to hear right now, but hidden within those words is the single best business tax deduction possible: Section 179.

Almost every piece of tangible equipment you bought for your company in 2022 is likely eligible for a full Section 179 deduction. And the deduction is good up until $1.08 million dollars of purchases is reached. 

For small businesses, that prettymuch means your entire years’ worth of equipment purchases can be deducted (as opposed to depreciating a small amount each year). Depending on your revenues, that can make a massive difference in your bottom line right now. And what company out there doesn’t need the money right now?

2022 was not easy by any stretch. But we’re all still here and 2023 is coming no matter what. This is what we have to work with, so let’s make the best of it. 

Happy New Year everyone! 

Honestly, I feel bad for Section 179, because all I’m seeing in the news is inflation and rates. I hear about how everything costs more. But I never hear about the single best business incentive ever invented: our friend Section 179.

But it’s still here in 2022, and it’s better than ever. Here are a few numbers for you:

• The deduction is a robust $1,080,000. That’s one million, eighty thousand dollars (up 30k from 2021’s limits). 
• The total amount a business can spend before the deduction starts to decrease is $2.7 million.

The above is simple: it means you can deduct the full price of qualifying new or used equipment, up to $1,080,000. And when you reach a total of $2.7 million spent, the deduction then decreases on a dollar for dollar basis. Most small businesses will never get near that amount spent, so this is really big. It means pretty much anything you buy for your business can be deducted 100% (almost all tangible business equipment, new or used, qualifies). 

Financing Increases Your Leverage

I’ve mentioned this “business hack” previously, but it’s well worth repeating. If you finance section 179 equipment, you will likely save more on your taxes than the total amount of your payments this year. 

Here’s an example: say you finance a piece of $100k equipment this summer. You deduct the entire thing at year’s end. At a 35% tax rate, that’s $35k off your taxes – that’s real money that stays in your bank account.

From summer to the end of the year, let’s say you pay approximately $12k in finance payments for this equipment. So you saved $35k in taxes, and paid out $12k in payments. Your net saved is $23k.   

That means the equipment technically cost you nothing this year. PLUS it made your bank account $23k larger. AND you got to use the equipment to hopefully make more revenue. Yes, this is real. 

Can you see why I love Section 179 so much, and why so many businesses use it? I never fail to bring up Section 179 when I’m talking to a business. It’s simply the best tax deduction imaginable, and it’s one every business should use every year.

It was a lot of money for a kid back then. And it made me feel very secure. Money in the bank is a great feeling anytime.

I also wanted a new videogame console. I could afford it right then, but it would have put a huge dent in my bank account. And doing that made me very uncomfortable – what if I needed that money for something else, or an emergency? 

So I made a deal with my father – an advance on a year’s worth of lawnmowing at his business.

I got my console, and I kept my bank account. In essence, I had “financed” a major, bank-account draining purchase. 

While we’re talking much larger numbers (and not videogame consoles), this is the exact thought behind much of the equipment financing many SMB’s do.  Let’s discuss this.

All businesses need equipment. Machinery, vehicles, software, office equipment, computers, and so on. Much of this equipment has a finite lifespan, and it’s continually changing / replaced / upgraded / etc. This means for any successful company, the flow of equipment is ongoing. 

Every company also has a myriad of other operating expenses: salaries, advertising, utilities, rent, taxes, and half million others.  

The “operating expenses” I mention are all generally paid for in cash (liquid funds). And to operate effectively, a company needs a certain amount/timeframe of operating expenses on hand – going month to month is dangerous.

So when expensive equipment is needed (and it will be needed), it makes much more sense to finance it over time. This keeps liquid funds at a much more “comforting” level.  

There’s also another aspect to this – it’s not just operating expenses and/or comfort. Emergencies happen. Having ample cash on hand allows a company to better withstand them. 

What kind of emergencies? Plenty – things like accidents or fires or similar are obvious. But there are more. What if your biggest customer suddenly has issues, and drops you? What if a strike hampers deliveries, and your loading dock backs up? What if there’s a pandemic?  Money in the bank lets you withstand these much better. 

During the early days of the pandemic, businesses borrowed in record numbers and amounts, much of this in the form of immediate equipment financing. Why? Because in the face of uncertainty, it’s better to keep your own cash in the bank and use someone else’s to purchase needed equipment.  

One last aspect to this – tangible equipment generally loses value. While I’d argue that if it’s needed to make revenue (even indirectly) it’s an investment, the fact is, it’s also not an “appreciating asset”. And the smart money says it’s always more advantageous to finance those things and pay for them over time. 

So keep your own money in the bank. If you need equipment, you can use ours. 

These are short (30 seconds to a minute and a half) recorded testimonials from real clients, all over the United States, and there are well over 100 of them. You can see the entire list here.

I realized I haven’t heard these in a while, so I spent some time listening to a bunch of them. And something really struck me as I listened to the different voices and accents from all over the country: THIS is the Sound of Small Business USA. 

Seriously, we have a walk-in freezer financed in Florida. This was for a Carvel store. 

A bit further down the list, we have snow removal equipment financing for a company in Utah.  Then there’s a boom lift financed for a campground in California (that one is funny because he goes into detail about all the collateral his bank wanted, which is why he came to us.)

More? How about a CAD/CAM Machine financed for a race design shop in Arizona? Or some equipment for a angus beef cattle ranch in northern Florida (so we’ve got both the main course and dessert covered in the Sunshine State… oh, we financed some equipment for a winery there too – it’s a full meal!)

One of the neat things about equipment financing is the types of businesses that we work with. Listening more to the list, we financed some equipment for a microscope service in Illinois. Did you even realize there are small businesses that deal only in microscopes? And while we’re on “science”, we’ve got lab testing equipment financing in Ohio, and mobile medical imaging equipment financed for a nuclear tech company in Maryland. 

This is just scratching the surface – we have thousands and thousands of customers. But even in a small sample of 100+, I am struck by the variety of industries, never mind the regional accents and speaking mannerisms.  The sheer diversity of our customers and company types is staggering, and it’s a joy to hear their voices.

The next time the news gets you down, click that link above in this post and give a listen to a few. I guarantee you’ll feel better.