When I posted about financing lab equipment last time out, I stated that it’s good to finance equipment that isn’t directly tied to profit. The thought being that if the equipment isn’t going to boost your bottom line right away, it’s clearly best to finance it over time.

And while that is true, the reverse is also true. It’s also great to finance equipment even when the equipment in question is going to immediately impact your bottom line in a positive way.

There are cases where a piece of equipment will pay big dividends from day one. Think of a tree service finally adding a large bucket truck. They are immediately jumping from the small jobs to the bigger ones – that’s a profound impact. I’ve known companies who have doubled or even tripled their revenues by adding one crucial piece of equipment. A bucket truck. A new delivery vehicle. A new machine that makes your manufacturing process 25% faster… these are all things that can have an immediate effect.

So why finance equipment in these cases? Because it may result in a positive cash flow every month, without any outlay. In other words, if you pay cash for a 45k widget maker, and it results in $2,000 of new revenue a month, you will need 22 and a half months before you break even. That’s almost two years “in the red”.

But say you finance that widget maker over 3 years, with a payment of 1400 a month… you are going to profit $600 a month until the widget maker is paid off (then you profit the entire 2k a month). You “broke even” right away, and were well in the black the entire time.  And we haven’t even talked about Section 179 yet.

I see this all the time. The numbers will always work in your favor. Even if your new revenue isn’t quite as much as your payment, it’s still better for your bottom line to finance equipment.

There is no bad time to use equipment financing. Like all the cool kids say: “it’s all good”.

• Cash (and cash flow) is King. Once again. The trend in recent years has moved away from having a large cash reserve. Essentially, high returns elsewhere meant having cash was a losing proposition. You don’t even need a business degree to see this – how many homeowners in recent years have used home equity as a quasi savings account? Well, this has ended – just like the homeowner with little equity, the business without a cash reserve may find itself in a very weak position, and unable to compete for very long.

• Related to the above, credit is tightening further. It’s harder to get a loan, whether you want to expand your business or simply buy a car. Especially if you are a business without cash. And while equipment financing companies (like mine) have much softer restrictions than the bank, we’re even looking a little harder.

• However, I am seeing an increase of “new blood” look to equipment financing. This started in the third quarter of last year, and has continued right up to… well, I got another call when I was writing this post. Companies that typically used cash to buy equipment have started to look into saving that cash, and instead lease equipment. Most of these companies are strong, smart companies that recognize the increased value of intelligently paying over time, instead of laying out a large sum of cash. Yes, credit can be harder to get today, but if you are a solid company, chances are you can get an equipment lease.

Basically, the bottom line here is simple. If you can keep a cash reserve, do it. It will make your company stronger. Ironically, if you lease equipment instead of buy it, you have more cash on hand, which will increase your attractiveness to all lenders (not just equipment finance companies.)

Perhaps some intricate question on the socioeconomic challenges facing us?

Or some question related to gas prices?

Or maybe some foreign policy question, because, as you know, I’m rather worldly (stop laughing).

Truth be told, it would be none of those. C’mon – if you’ve read here at all, you know I’m about as stereotypical as a finance/tax guy can be. So my question would be related to Section 179 (big surprise there.)

Specifically, it would be “As President, would you change the vehicle deduction rules regarding Section 179?”

I would ask that because I personally feel the rules for Section 179 in relation to vehicles are antiquated. I think the limit increases that came about with the Economic Stimulus Act of 2008 are a move in the right direction, but the vehicle rules are silly.

Currently, a business can deduct almost any piece of equipment under Section 179. But as far as vehicles go, the vehicle has to weigh 6,000 lbs plus. This means the only ‘everyday’ vehicles that qualify are large SUV’s, Hummers, etc.

Now, on the surface, I understand this. We don’t want people just starting any old business and then writing off their personal car. I get it.

But you know; the world has changed. With computers and the internet, so many people have started to work from home companies – legitimate work from home companies. I personally know a copywriter, an accountant, a business consultant, and a marketing dude (that’s what he calls himself) who all operate legitimate businesses out of their home, and use their car extensively. In fact, they use their car for business as much as someone with a delivery van would. So why should the delivery van get Section 179 consideration, but not the consultant (or the marketing dude’s) car? It makes no sense.

Again, I realize we don’t want every Amway distributor or part time babysitter out there claiming their car, but let’s get real, there are plenty of legitimate businesses out there that deserve this consideration. Maybe make the business have to gross 50k before their vehicles can qualify for Section 179 or something like that.

Anyway, that’s my question. Hopefully I can get it out before the Secret Service throws me out.

Of course, higher fuel prices mean everything else will be going up in price, which should shock nobody, since we’ve been hearing of a recession for quite some time.

If you recall, a few months ago, I posted about financing equipment during a recession, and how businesses that expand during hard times actually have a better chance at surviving. However, when I mention this to people, I sometimes hear statements like “but Fletch, if times get hard, I can’t afford to finance new equipment.”

To that, I have a simple solution that many might not be aware of: finance used equipment. Unknown to most businesses, some (but not all) equipment finance companies will happily finance used equipment. In fact, I’ll go as far to say that used equipment financing is a large part of my business here.

It actually surprises me that more companies don’t know that used equipment financing is an option that is available to them. Oh sure, we all know thereâ€s a market for used vehicles, and even the bank will happily finance those. But there’s also a market for used printing presses, used welders, used office furniture, used industrial shelving; the list goes on and on. In fact, just throw the word ‘used’ in front of any piece of finance-able equipment, and you likely have a great money-saving option. And many equipment financing companies will happily finance this used equipment.

However, I do want to mention that financing used equipment isn’t something all equipment financing companies participate in (mine does, as do some others, but it’s a bit more work on our end, so some shy away from it.) There are also a few things you may want to keep in mind when financing used equipment, which I’ll go over in a future post. But for now, just understand that used equipment financing is definitely an attractive option in today’s economic climate, and something you may want to look into to help save a few dollars.