1. A Nice Increase for Section 179

Section 179 was made permanent a few years ago, and it’s received small annual increases since (this year it’s $1,050,000, up 10K from 2020’s $1,040,000). Ok, a 10k a year increase always helps, but it’s small when compared to the “million dollars” the deduction is. I’d like to see an increase with another zero. And maybe a crooked number in front. It’ll help spur business spending.

2. Inflation Going Away

I’m reading the consumer Price Index rose 6.2 percent in October from a year earlier. That’s the biggest increase since the 90’s. I’d like it to stop please.

I feel it will, simply because I suspect a lot of price increases are more for coping with the aftermath of pandemic shutdowns than anything else. Supply chain disruptions, labor shortages – they all created more demand than supply, which means prices must increase. But I already “feel” it – we’re hitting our new norm, and prices should stabilize. That’s my hope, anyway.

3. Businesses Further Innovating

Here’s an excellent example of the pandemic making businesses innovate and take advantage of technology: almost all hotels now have “touchless” check-in and check-out. The pandemic forced them into this, but as a consumer, I love it, and wonder why they didn’t do this sooner. I really like not waiting to check out, and just dropping my keycard in box at the desk. 

This is better for the hotel too – now the clerk doesn’t have to spend time checking people out. They had access to this technology years ago, but it took the pandemic to make this win/win scenario a thing. Here’s hoping more companies start taking advantage of technology (and hey, let me remind you that Software Financing is a thing). 

4. Fletch wants a PlayStation 5

Yes, I am a big kid, and I want a PlayStation 5. I’m pretty sure I’m not getting one this year, as they are super scarce. But I’ll still mention it, as that’s the “wish” part of the wish list.

All in all, I’m always optimistic about the future, but even more so right now. As a country (and a planet) we’ve taken some big, disrupting hits, and while some businesses were negatively affected, strong companies are surviving. The best is definitely yet to come.  

One thing that is sure to remain is companies rushing to get a Section 179 purchase or three in before the deadline. And as I’ve written in the past, that could be spotty depending on what you are buying.

** For those who don’t know, Section 179 is a business tax deduction that allows you to write off the full price of eligible equipment, up to a little over one million dollars. It’s a big deal.  

Remember the deadline requirements with Section 179 – your eligible purchase must be bought and put into service by midnight 12/31. That second part (put into service) could trip some companies up. 

The post-pandemic supply chain crunch is very real and is affecting countless industries. The domino effect is strong as well – even if you think your industry isn’t directly affected, a hard-to-get computer chip might be required to make the widget your industry relies on. Or your non-affected goods might sit in the container at the port weeks longer than usual. You’ll get it, eventually, but maybe past the deadline? Nobody is immune.

There are two suggestions if you are reading this now (November 2021) and still haven’t bought your Section 179 eligible purchases for the year:

1. If you can be guaranteed delivery by 12/31, buy it right now. As in today, not tomorrow. If you are paying cash, great, go do it. If you are financing, get your financing lined up immediately (hint: we can help). Getting it now can make a big difference in delivery. 12/31 is coming fast.

2. If delivery by 12/31 is iffy, maybe consider used? A preowned piece of equipment has the advantage of being right here, right now. If that works for you, definitely consider it. 

You can also wait until next year, but that doesn’t help your 2021 either. And for many companies, 2021 isn’t going to be slotted into the “our best years” list, so getting a nice tax deduction at the end is desirable. 

Section 179 is ready and waiting. Use it.

*For those who don’t know, Section 179 allows businesses to write off the full price of qualifying equipment (which is almost anything a business can use), up to a little over $1 million dollars. It’s good for any qualifying equipment purchased and put in service during the tax year.

One reason I mention Section 179 so often is sooo many companies do not know about this tax deduction. Believe me when I tell you, eyes are opened wide when we explain it. The conversation usually goes like this:

Wait, you’re telling me I can write off the entire $50k of this purchase? That means (does math) I will save $17,500 in taxes. Is that true? 

Yes, that’s absolutely true (the above assumes a 35% tax rate). 

So my question to you is this: if you sell to businesses, are you telling every single customer about this? And if you aren’t, why not? Because I’ll bet anything a good number of them are NOT aware of this. 

Telling a prospective customer they can write off the entire price (thus knocking whatever their tax rate is right off the true cost) can very quickly turn a “no” or “maybe later” into a full-on “yes”. Any good salesperson will salivate when told a customer doesn’t know about Section 179. 

Here in 2021, there’s an added incentive: as I’ve been mentioning time and time again, supply chain delays will have an effect on Section 179 – you need to get the equipment and put it into service. So having equipment in stock and ready to ship is a HUGE selling point.

If you sell to businesses, and have stock ready to ship, I can think of no better incentive than making prospective customers aware of Section 179, and you can get them their equipment in time to take advantage of it. 

Section 179 is a great sales tool. Use it.

Ok, that’s probably not what sprang to your mind, but that’s fine. You can have whatever you thought of (vacation, swimming pools, baseball, whatever) and still take advantage of Section 179.

There’s a reason why right now is a great time to finance a Section 179 purchase. With the year half over, if you finance equipment now, you have what, maybe 5 or 6 payments that you’ll make in 2021? Well, since you get to deduct the entire purchase price of your eligible equipment, your Section 179 tax savings will almost certainly exceed the total of the payments you make this year. 

You read that correctly – you will likely save more in taxes than you pay out for the equipment this year. That makes acquiring the equipment technically a no-cost proposition for 2021. PLUS you get to use the equipment to make more revenue.

When you think about large businesses, you hear the word “leverage” a lot. Using Section 179 financing  is “leverage” that’s available to any size business. The small Mom and Pop can take full advantage of Section 179 financing just as much as a multi-million-dollar entity. In fact, a smaller company might have even more leverage due to scale – proportionately, the impact to the bottom line is larger.   

You can look at this a few ways: if you finance a 50k piece of equipment in June, assuming a 35% tax rate, you’ll save $17,500 on your taxes. You’ll likely pay out approximately 5-6k in payments for the rest of 2021… so that’s like 11k more in your bank account just for financing Section 179 eligible equipment. 

Or, you can look at it another way – that $17,500 saved will likely cover your payments into 2023…  you won’t be reaching your own pocket until then. And all that time you get to USE the equipment. 

That’s serious leverage. 

We’ve created a downloadable PDF that explains this in detail. It’s available here: https://www.crestcapital.com/Section-179-Financing-Deductions.pdf

So yes, it’s a magic time of year. Go to a BBQ, and go on vacation. But get that Section 179 financing purchase in also – your bottom line will be better for it. 

I even mentioned financing used equipment, and also went a step further and added in that we finance private party deals (aka user to user, or in simpler terms, buying a used piece of equipment from anyone who isn’t an authorized or “official” dealer.)

And since I mentioned that, I want to mention this for anyone interested: before you talk to your lender about used equipment, do some homework. Because in the end, it’s Caveat Emptor. Here are some tips:

If possible, buy used equipment from a reputable dealer. 

Buying used equipment from a reputable dealer is akin to buying a used car from a well-known automobile dealership – they will likely stand behind the sale with two very important assurances. The obvious one being some type of warranty (even a short one); the not-so-obvious one is that a reputable dealer has probably conducted a UCC search looking for past liens. They also will likely attempt to make certain the equipment is able to be sold in the first place.  

Note that I am using words like “probably” and “likely” here. So be diligent and ask about these things, and even ask what happens if an old lien crops up – will your dealer stand behind the equipment? A reputable dealer should.

Buying from a reputable dealer (especially one that’s an “authorized reseller” or similar) can minimize most of the risk of buying used equipment. 

The rest of these tips are more for buying used equipment from private sellers and/or someone selling on consignment (like a broker). It still may be an excellent deal, but it also means the risk is increased. 

If at all possible, trace the paperwork to the original sale/owner. 

Having a clear paper trail all the way back to the original sale is something you should try and get, so a proper UCC search can be conducted. Now, in the case of long-lived equipment, tracing the sale back to the original owner may be impossible. But it definitely helps to have a paper trail back to the original sale from the manufacturer. And, of course, if you are buying equipment from the original owner, all the better. 

Make sure the equipment CAN be sold in the first place. 

This is trickier than it appears, and even if you have assurances, it can still be murky (which is why buying from a dealer or someone you implicitly trust is recommended). 

For example, if the seller of the equipment has an outstanding bank loan, it’s very likely the equipment is under a blanket lien, whether the seller is aware of this or not. And while it’s probable nobody will show up to halt the sale of the equipment, legally, the bank will still have claim to it. You will want this (and any other) lien cleared / released before buying, period. And again, this is why multiple previous owners can be problematic – if any of them had a bank loan or such, the equipment could have an old lien that nobody is aware of.  

We’ve also seen instances where partners (or spouses) had a falling out, and equipment was sold that should not have been. Again, even if you buy it and have a receipt, you may not be the legal owner. 

Don’t buy from a craigslist seller who only wants cash.

I’d like to think I don’t need to say that, but I do. Just don’t do it. And if the serial number is filed off… yea, run away. 

The biggest reason to be diligent when buying used equipment is in the end, you’re on the hook for it. Old liens that nobody knew about or an unauthorized sale could mean you lose the equipment, yet still owe your lender for it. And let’s be honest: any situation where you’d lose the equipment is already a messy one legally – good luck getting your money back.

The tips we’ve outlined above can help, but in the end, are not legal advice, and cannot guarantee anything. 

Used equipment is typically an excellent choice, and we love financing it. But be diligent and understand the possible pitfalls and risk.