"Prescribing" the Rights Financing for Your Business

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  • FMV leases, or operating leases, can deduct payments and off balance sheet benefits because doesn’t show up as debt on balance sheet
  • "Prescribing" the Rights Financing for Your Business

    1. 1. “ Prescribing” the Right Financing for Your Business Using Leasing to Acquire Equipment, Technology and Software
    2. 2. Equipment Leasing Facts/Trends <ul><li>History of Leasing </li></ul><ul><ul><li>Thousands of years old: Ancient Samarian city of Ur </li></ul></ul><ul><ul><ul><li>Agricultural tool rentals to farmers by priests </li></ul></ul></ul><ul><ul><li>Utilized By the Automotive industry In the 1950’s </li></ul></ul><ul><ul><li>Needed a way to move more cars with increased production capacity </li></ul></ul><ul><ul><li>Used a small monthly payment to make a large ticket item more cost efficient to the general public </li></ul></ul>$300 Billion industry and growing 80% of companies lease equipment <ul><ul><li>Paying monthly for the use of equipment, technology or software that generates revenue, or, improves workflow efficiencies and bottom line. </li></ul></ul>
    3. 3. What To Lease, You Ask?!
    4. 4. Benefits of Leasing <ul><li>Conserve Cash & Working Capital </li></ul><ul><li>Preserve Bank Lines of Credit </li></ul><ul><li>Pay Only for What You Use </li></ul><ul><li>Enjoy 100% Financing </li></ul><ul><li>Tax Advantages </li></ul><ul><li>Avoid Bank Restrictions </li></ul><ul><li>Eliminate Equipment Obsolescence </li></ul><ul><li>Flexibility </li></ul>
    5. 5. Lease Types <ul><li>Capital Lease </li></ul><ul><ul><li>Title transfers to lessee at end of term </li></ul></ul><ul><ul><li>$1 Buy Out </li></ul></ul><ul><ul><ul><li>Get it in writing! </li></ul></ul></ul><ul><ul><li>P.U.T. (10%) </li></ul></ul><ul><ul><li>Section 179 tax deduction </li></ul></ul><ul><li>True/Operating Lease </li></ul><ul><ul><li>Fair Market Value (FMV) </li></ul></ul><ul><ul><li>Asset is off balance sheet </li></ul></ul><ul><ul><li>Monthly operating expense written off </li></ul></ul>
    6. 6. Flexible Lease Options <ul><li>Deferred Payments </li></ul><ul><ul><li>3 months @ $20/month contact payment </li></ul></ul><ul><li>Step Payments </li></ul><ul><ul><li>Months 1-3: $150 </li></ul></ul><ul><ul><li>Months 4-6: $350 </li></ul></ul><ul><ul><li>Months 7-36: Full lease payment </li></ul></ul><ul><li>Seasonal Payments </li></ul><ul><ul><li>Monthly payment skip or reduction </li></ul></ul>
    7. 7. Case-in-Point <ul><li>Subject: Pharmacy Financing </li></ul><ul><li>Todd: </li></ul><ul><li>I know this is a strange question, after the fact, but do you </li></ul><ul><li>think the leasing company would restructure Frameworks </li></ul><ul><li>and lease it to us. I am looking at different ways to affect </li></ul><ul><li>our cash flow. Monthly lease payments may have been a </li></ul><ul><li>better bet, but now after we have paid for everything, how </li></ul><ul><li>much would they have been covered in the lease? Would they </li></ul><ul><li>have financed any of the training, expenses and startup </li></ul><ul><li>costs, as well as the licensing of the software. Who would </li></ul><ul><li>I talk to? </li></ul>
    8. 8. ‘Rule of Thumb’ <ul><li>Need capital for less than 12 months </li></ul><ul><ul><li>Take advantage of bank relationship </li></ul></ul><ul><ul><ul><li>Line of credit </li></ul></ul></ul><ul><li>Long-term use of a fixed asset </li></ul><ul><ul><li>LEASE! </li></ul></ul>
    9. 9. Tax Benefits of Leasing: Special Depreciation Rule * <ul><li>Section 179 tax code allows for 100% depreciation of capital in 1st year up to $250,000 in 2009. </li></ul><ul><li>Section 179 Deduction: $250,000 </li></ul><ul><li>50% Bonus Depreciation(2009): $50,000 </li></ul><ul><li>Regular First Year Depreciation Deduction: $10,000 </li></ul><ul><li>Total First Year Deduction: $310,000 </li></ul><ul><li>Cash Savings on Equipment** $108,500 </li></ul><ul><li>*Clients should consult their tax advisor to determine benefit availability </li></ul><ul><li>**Assuming 35% tax bracket </li></ul>Example: $350,000 Medication Packaging Unit
    10. 10. Acquiring Credit <ul><li>Personal Credit Scoring </li></ul><ul><ul><li>Timely Payments </li></ul></ul><ul><ul><li>Access to Cash </li></ul></ul><ul><ul><ul><li>% availability of revolving credit </li></ul></ul></ul><ul><ul><li>Number of Inquiries </li></ul></ul><ul><li>Business Scoring </li></ul><ul><ul><li>Time in Business </li></ul></ul><ul><ul><ul><li>Start-up vs. seasoned business </li></ul></ul></ul><ul><ul><li>Business Type </li></ul></ul><ul><ul><ul><li>S-corp, C-corp, LLC </li></ul></ul></ul><ul><ul><li>Industry </li></ul></ul><ul><ul><li>D&B Reporting </li></ul></ul><ul><ul><ul><li>Paydex: Industry Peer Measure </li></ul></ul></ul><ul><ul><ul><li>Paynet: Financial debt, i.e., loans, leases, credit lines </li></ul></ul></ul><ul><li>Type of Leased Asset </li></ul>
    11. 11. yooj Rewards
    12. 13. The size of success. TM
    13. 14. Questions? Comments? Thoughts? Needs?

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