Secure the right type of financing becuase wrong type of loan or lease can force you out of business.
Securing the right type of financing, or leasing equipment arrangement, will probably be the most important step in starting your new screen printing or direct-to-garment business. The wrong type of loan or lease can force you out of business. Some important items to review and study carefully: variable rate loans, short term renewal dates, large balloon payments, restrictions on expansions, additional borrowings, term restrictions, early payouts, and more. Start-up businesses are successful if the borrower has a Business Plan, and a Strategy to implement the Plan. Knowing how to secure financing, knowing how to market your products and how to manage your business are all important elements in starting a new screen, sublimation, or DTG business.
What Exactly Is Leasing?
An equipment lease is a contract for the use of a specific piece of machinery, (or multiple pieces of), equipment for a specific period of time and for specific lease payments agreed upon by you (the lessee) and the leasing company (the lessor) in advance. The lessor is the owner of the lease equipment and makes the initial cash investment for its purchase. The lessee is the user of the equipment and gets all the benefits of its use, just as if they owned it. Leasing lets you finance the use, without having to finance the purchase.
Why Lease
Leasing is one of the oldest services in the world. Leasing originated over 2,000 years ago and has developed into a multi-billion dollar industry today. The U.S Department of Commerce estimates that in the year 2010, $300 billion worth of equipment will be acquired utilizing leasing as the method of financing. In fact, 80% of companies today lease some or all of their equipment and nearly 40% of all the equipment is acquired utilizing some sort of leasing.
Advantages of Leasing Include:
Free Up Cash and Maximizes Cash Flow
Maximization of cash flow is achieved in leasing because leasing does not require a burdensome down payment that can consumes precious cash flow, especially if you are a new business start-up. As a result, you can focus on inventory, production, marketing and serving your customer.
Potential Tax Benefits
Who wants to pay the government more taxes than necessary? Monthly lease payments may be fully deductable as an operating expense. Only the interest portion of a bank loan and depreciation are tax deductable. If you want to pay less income tax, talk to a professional about the possible tax benefits of leasing. You can even choose if you want no down payment on an equipment purchase, or if you want to combine a down payment and lease the balance. When applying for a loan at a bank, you will be asked for a significant down payment upon purchase of most industrial equipment. That down payment can represent a large sum of money; money that will not be available for the day-to-day operation of your business. Ask a Lawson salesperson today our "No Money Down" leasing options!
Convenience
It is easy to get started leasing from Lawson. We only need you to complete a simple credit application to approve you for a credit line up to $75,000. In most cases, you can receive a credit decision typically within 48 hours.
Use More Money for Working Capital
Leasing does not tie up your money and allows your business to operate correctly. If managing your cash flow is important to your business, then leasing is the way to go.
Leasing Provides an Additional Source of Credit
Leasing offers an additional source of funds when all other lines of conventional credit are exhausted. Many of our clients utilize their bank for land, building, inventory and accounts receivable financing; therefore, leasing is the optimal choice for the acquisition of capital screen or digital equipment.
Leasing is a Hedge Against Inflation
Interest rates are not going to be this low forever, and will likely increase in the near future. Leasing helps ensure that you can take advantage of "cheap money." Fixed payments are helpful when making budget projections, especially when compared to variable rate loans.
Leasing Protects Against Operating Old Obsolete Equipment
When leasing, you are paying for the use of the machinery, not for the machine itself. With that in mind, you can be free from the inefficient dinosaur of a machine because you own it. Leasing promotes the integration of technology, as well as increased efficiency. And if you so desire, many of our leases do allow you to purchase the equipment if you want, at the conclusion of the lease either for 10% of its fair market value or $1.00, depending on how you structure the lease deal to begin with.
Leasing Can Provide 100% Financing for Equipment Acquisitions
You will find that Lawson wants to make your next equipment acquisition as easy as possible. We will not only finance the equipment, we can also finance the installation and training. Call us for more information.
Leasing Provides Flexibility for Budgeting
We are strive to meet your individual financial needs and want to tailor a lease to meet your unique situation. To learn more about these benefits, contact one of our sales staff so they can assist you with increasing your businesses efficiency, productivity and bottom line profits.
Does Leasing Cost More?
Leasing is a practical way to use new equipment and compares favorably with other forms of financing, costing you about the same. Companies look at what typical bank loan rates are and then factor in your interest deduction and depreciation to arrive at what a loan really costs. Leasing company then set their rates to be competitive and work backwards, factoring in the greater deductions offered by the lease, to arrive at lease payments that will give you the same approximate net cost. Anyone who says that leasing always costs more is just as wrong as anyone who says leasing always costs less. The truth is it costs you about the same to lease equipment as it might cost to buy it. Businesses lease for cash flow and other reasons as cited in this article.
3 Types of Leases are for our industry
- 10% or Fair Market Value Purchase Option (whichever is greater). This means, at the end of your lease, you have the right to purchase the equipment for 10% of the original purchase price or fair market value, whichever is greater. This is considered a true operating lease allowing a 100% business write off over the term of the lease period.**Lawson equipment historically is worth at least 50% of the original cost after 5 years. Half of the liability. Example: $35,000.00 cost, 50% fair market value, your buy-out could be as much as $17,500.00
- 10% Purchase Option Lease The most popular of all equipment leases is the 10% purchase option. When your lease period has ended, you can purchase the equipment for 10% of the original purchase price. Example: $35,000.00 purchase price, 10% buy out is $3,500.00 (not available in all states). Consult your CPA for the tax options and benefits.
- $1.00 Purchase Option IRS views this lease as a conditional sales contract. You have the option to purchase the equipment for $1.00 at the end of the lease period. Normally, this type of monthly payment is much higher than a 10% or fair market option lease (this type of lease is not subject in all states). Tax benefits can be less than the other leases, consult your CPA or tax advisor.
Overall, all of the leases we have described have terms from 12 months to 60 months. Start-up businesses sometimes require a 10% or 20% down payment. Existing or start-up businesses require the first and last payments in advance. Lawson Screen & Digital Products provides quality screen printing equipment, and direct-to-garment printers, in addition to providing screen printing and digital supplies to the beginner and professional alike. Our products have a history of being easy to use, are safe for the environment, and are pocket book friendly. We have an extensive inventory, with over 15,000 items, ready to ship, when you place an order. Orders can be placed by phone 314-382-9300, or over the web lawsonsp.com. Our technical help line is available by calling 314-382-9300.
