Financing signs (or financing signage, for those who want to get official sounding), is one of the more common aspects of equipment financing. And to be honest, in my eyes, it’s a very smart use of credit, especially for small and medium businesses.
The reason it’s a smart use of credit ties to the (lack of) immediate return on investment (ROI) of signage – especially signage that is replaced. Here’s what I mean by that:
To start, any business that depends on walk in / drive in traffic has to have a sign – that’s a given. When a business first opens on Main Street, they put up a sign. Since they are a new business, they probably didn’t finance this sign, so maybe it’s not the best one possible, but hey, it’s good enough, it’s there, and it announces their presence. Everyone driving by sees it as a “new” sign, which leads to an immediate ROI (“oh look, triple fried donuts – let’s try some”).
Ok, seven years go by, and “Fat Bob’s Triple Frieds” (wonder how he got fat?) are big business. But times change, and other eateries open up, and all of a sudden, Bob looks down the street at all the newer businesses and notices his sign looks… old. Now Bob is a good businessman, and knows he really needs to stay looking sharp. He knows that while nobody is going to say “I won’t go in there because of the old sign”, he also knows that over time, a diminished look will hurt him.
So now Bob wants to change his sign, not so much to “increase” business, but to stay looking clean and modern and maintain his position. That’s why I say the ROI on a replacement sign is negligible. A new businesses’ sign will pay for itself fast. Replacing an existing one, while no less important in the bigger picture, will take longer to pay for itself. This is why financing a new sign over several years makes excellent business sense. Add in that you can take a Section 179 deduction on the new sign, and you have a situation where you can get an increased year-one ROI on signage financing.
Now if you’ll excuse me, I have a sack of triple-frieds calling my name.