Author Archives: DFI

Top 10 Reasons for Financing Software or Technology

One of the keys to success in business is how well you leverage your capital to support and grow your company. The decisions you make related to the acquisition of resources can be crucial. This is especially true with software and technology, as they evolve rapidly and you need to stay current to stay competitive.

So, should you purchase resources outright? Get a bank loan? Or, is there a better way?

For many companies, financing is the right choice. Why? Leasing provides a number of advantages, including that it is a financial strategy that allows you to:

  • Ensure your technology is refreshed on a regular basis. Leasing makes it easy to stay current with the latest upgrades, which is important since software and technology have a much shorter lifecycle than things like equipment.
  • Use your assets to generate revenue and cost savings, and expedite your ROI while you manage payments over time. In other words, when you lease technology rather than buying it, you have less capital tied up in the asset.
  • Cover 100% of your equipment, software, and services with 0% down. Here again, the money that you don’t have to put down can be working for you in other ways.
  • Acquire more and better equipment than you could without financing. In a purchase scenario, you may feel compelled to purchase low-end technology or less of it so you can keep more capital in reserve.
  • Save cash for expansion, improvements, marketing, and R&D. Financing gives you the power to move from just “getting by” to “getting ahead.”
  • Bundle your equipment, installation, and maintenance from multiple vendors into a single payment. Running a business is complex. Leasing makes it simpler.
  • Choose payment terms customized to match your cash flow. For many businesses, cash flow varies seasonally or based on other factors. Leasing allows you to get on a schedule where you make payments when funds are most available.
  • Select fixed lease payments to protect against rising interest rates and inflation. There is great comfort in knowing that your lease payments will remain constant no matter where interest rates go.
  • Execute sale/leaseback transactions on recently acquired assets to generate needed working capital. Leasing offers tremendous flexibility as you craft your financial strategy.

The Sooner You Act, the Bigger the Benefits

Taking advantage of leasing for your software and technology acquisitions isn’t difficult or time-consuming. It just requires making the decision to move forward. And, of course, the sooner you get started, the more benefits you’ll see when you look back at your financials at the end of the year.

 

Optimize Your Equipment Budget Through Leasing

If you’ve ever wondered, “Why lease equipment and technology for my business?” our slideshow has the answer. Leasing provides many strategic advantages. Click through this clear, concise presentation to learn more.

Why Expected Interest Rate Hikes Make This a Great Time to Lease

In the wake of the financial crisis of 2007-08 and the Great Recession that followed, the Federal Reserve cut interest rates dramatically. Its near-zero interest rate policy—or ZIRP as those in finance have come to call it—was designed to help the economy recover more quickly, and most believe that strategy has been a positive factor in the steady improvement in recent years.

However, in order to maintain a stable economy and cap inflation at 2 percent, the Federal Reserve is expected to raise rates gradually in 2018. In fact, according to the Equipment Leasing & Finance Foundation, the benchmark interest rate will likely be increased three to four times this year. The fact that interest rates inched up in April may be a harbinger of things to come.

Leasing Now is to Your Advantage

The prevailing wisdom is that when interest rates are low, that is the time to grow your business since it is more cost-effective to do so. Consequently, when some companies hear news of impending interest rate hikes, they feel maybe it is time to hold off on acquiring more equipment and other business essentials.

However, there are many reasons why that strategy should not apply in the current situation. For example:

  • Versus a traditional bank loan rate, which may change as the benchmark lending rate changes, the payment on an equipment lease is fixed for the length of the agreement. So, by leasing now you are “locking in” your savings as rates climb.
  • The Fed is expected to push the benchmark lending rate up by only a quarter of a percentage point per quarter. So, while it is wise to get equipment leased soon, there is still time to carefully assess your needs and make effective leasing decisions.
  • The money saved by executing leases now can impact future business planning, cash flow, and profitability. In other words, there are both short-term and long-term benefits to leasing at the current rates.
  • While rates are expected to rise, the economy is still predicted to grow significantly for the foreseeable future. Choosing to delay leasing may mean your business fails to capitalize on that growth.

How a Leasing Partner is a Resource in Uncertain Times

A leasing company that is a true partner to your business does more than simply help you lease equipment and software. Especially in times when interest rates are expected to move, it can be crucial to collaborate with a provider that:

  • Keeps a close watch on what The Fed is up to in order to anticipate changes and ensure you are well positioned to take advantage of them
  • Is prepared to help you adjust your business strategy quickly as conditions warrant
  • Maintains an open line of communication with you so that you are comfortable reaching out as your needs or financial position change

At Dynamic Funding, Inc., we serve as a valuable resource for our clients, not only as we work with them to execute leases, but before and after they sign as well. If you have questions about how rate changes this year will affect the equipment leasing market, please contact us.

How the New Tax Law Affects Equipment Leasing for Small- and Medium-Sized Businesses

Most provisions of the new tax law that was passed in December 2017 went into effect on January 1, 2018. Tax law being a complicated subject, it’s not surprising that many small- and medium-sized businesses (SMBs) are still learning about the specifics of the legislation. In fact, according to an industry survey, 50 percent of small business owners are “not familiar” with the tax law and how it affects them. Among its wide-ranging effects is the impact it will have on business equipment leasing.

What You Need to Know About the New Tax Law and Equipment Leasing

It has been much publicized that the new tax law lowers the corporate tax rate from 35 percent to 21 percent. But, few small business owners actually pay corporate taxes. What does benefit LLCs, S corporations, and sole proprietorships in terms of how income is dealt with is a new 20 percent deduction for the taxable income that “passes through” and is taxed as personal income.

However, what may have an even bigger effect on small businesses is how the new tax law impacts the acquisition of assets. If your company is looking to lease computers, furniture, software, and the other assets you need to operate, we see the new tax law (in particular, Section 179) as having two primary provisions you should be aware of. The first is that at the time you acquire an asset, you can now expense up to 100 percent of the cost. And, the write-off for equipment has doubled from $500,000 to $1,000,000.

Previously, companies would spread out the expense of equipment over, say, five years. Now you are allowed to take that expense in the first year. If your business is profitable, this upfront “hit” can be very beneficial as the depreciation expense lowers your taxable income, allowing you to pay less tax and keep more of your money. What you are able to do in a leasing scenario is even better. You can still make your payments over time even if you take the expense and lower your tax obligation on Day 1.

The second key advantage of the new tax law is that the provision above applies to both new and used assets. In the past, you only received benefits for the acquisition of brand new equipment, software, etc. Now used assets are covered as well. In fact, while they don’t occur often in our business, even sale/leaseback transactions can be treated this way.

The Bottom Line for Your Business Leasing

The implementation of the new tax law puts us in the coveted position of being the bearers of this very positive news! And, we’re eager to spread the word to our clients.

Ultimately, the legislation is advantageous to SMBs when it comes to acquiring assets in general. And, it’s important to remember that if that acquisition is through a capital lease, you get the best of both worlds: taking the expense up front while spreading the cash flow over time. This can be especially beneficial if your business is like most and cash flow is actually more important to you than expense.

If you have questions about how the 2018 tax law can be used to your advantage on computer, furniture, software, or other leases, please contact us. We’re happy to talk specifics about your business leasing needs and how the new legislation will impact you financially.