First Financial, LLC focuses on taking the stress out of financing and leasing equipment. As your company grows, obtaining equipment will become a necessity to keep your competitive edge. Whether you are adding, upgrading or replacing equipment, First Financial, LLC has a program for you. First Financial, LLC offers programs at very competitive rates for the strong, well-established company with over three years in business as well as the company with challenged credit that is just starting out, or even a pure start-up venture. We thrive on understanding your business and your financing or leasing needs so we can offer the most beneficial program to meet your goals. We consult each customer on how to improve and strengthen their borrowing ability for future purchases as well. We want to earn your business and develop a long-term relationship with all customers through our financing expertise and stellar customer service. First Financial, LLC has been in business for since 2004 and will continue to be here in the years to come providing equipment financing that will meet your needs.
Equipment Financing or Leasing, which is best for you?
Financing and leasing are two different financial products that provide different benefits to companies and can be confusing to customers. The determination to use a financing product or a leasing product depends upon the business structure and the needs of each individual business. First Financial, LLC will work to understand your business to help you decide which financial product that will meet your goals. First Financial, LLC can offer leases up to 84 months on new equipment (120 months on certain transactions) and 72 months on used equipment depending on the equipment age and amount financed.
Financing
With today’s tax codes and the continuance of Section 179, most businesses benefit from the financing equipment instead of leasing. Financing offers the following:
- The equipment is owned/titled/registered in the name of your company immediately upon purchase.
- Once the loan is paid in full on titled equipment (i.e., Truck or trailer), the lien will be released and sent to your business.
- Under IRS section 179, a company may write-off the full purchase price of the equipment against your income in the year you purchase any equipment up to $500,000. This can save most companies up 30% of the cost of the equipment.
- When financing equipment, it is an asset and will appear on your balance sheet as an asset and the loan as a liability. This can be an issue for companies that do not want new debt showing on their balance sheet due to having to renew a line of credit with their bank, among other reasons.
For example:
You are a site development construction company and you need two additional bulldozers to handle new projects. You are buying two 2014 Caterpillar bulldozers for $40,000 each for a total cost of $80,000. You may opt to get 100% financing with no money down, so your loan would be for $80,000 for 60 months. Your company made a net profit of $250,000 that year. Under section 179, you write-off the entire purchase of $80,000 against your income, reducing your net profit down to $170,000. If your tax rate is 30%, you basically just saved $24,000 on the purchase and actually paid $56,000 for the bulldozers. Many companies work with their accountants at the end of the years to determine how much equipment they should purchase to maximize their tax benefits under section 179. Remember, you can buy up to $500,000 worth of equipment and write
it off against your net income.
Leasing
There are several types of leases – PUT, FVM, Operating Lease, and Full Maintenance Lease. First Financial, LLC offers a PUT (Purchase upon Termination) lease and FMV (Fair Market Value) lease for up to 84 months. Leases offer the following:
PUT Lease (purchase upon termination) – most popular
- The equipment is owned by the lender and leases to your company.
- Titled equipment will be registered in your company’s name.
- Some states require that sales taxes on the lease are paid upfront and others require sales tax to be collected monthly with the lease payment.
- Put leases require a buyout of $1.00, 10%, or 20% at the end of the lease, which can reduce your monthly payments and improve cashflow.
- Once all lease payments are made and the buyout is satisfied, the equipment will be titled or transferred to the customer.
- Leased equipment payments appear on a company’s Profit & Loss statements as it is an expense just like your monthly rent payment or monthly electric bill and will reduce your net profit it a slightly different way than financing would. A monthly lease payment of $800 would reduce you P & L by $9,600 ($800 x 12). From a tax standpoint, this is not as beneficial as what section 179 provides with financing the equipment, but…..
- Leased equipment does not appear on the company’s balance sheet, so a lease may be more beneficial to a company the does not want to add debt to their balance sheet due to other lines of credits that need to be renewed, etc.
FVM (Fair Market Value Lease)
- An FMV lease provides the same this as a PUT lease with the exception of the buyout at the end of the lease and the fact that you can simply turn the equipment back in to the bank.
- An FMV lease does not have a setdollar value set at the end of the lease but instead had the buyout value equal to the fair market value of the equipment at the end of the lease. This can leave a customer uneasy as the value in 5 years is not known at the time the lease initiates. However, most companies that offer an FMV lease can put a
maximum amount or cap on the fair market value at the end of the lease in the
contract so the customer can determine the most it could cost to buy it out. - However, an FMV lease can be beneficial to larger companies with a fleet of
vehicles. - If the fair market value seems too high at the end of the lease, the customer can simply turn in the equipment. However, most banks would rather not get the equipment back so that the fair market value can be negotiated in most cases.
You can learn more about equipment financing and leasing by calling the professional loan providers at First Financial, LLC, or you can click here to start your application.