I'm pretty sure that's been said identically in the past. Josh Luthman Office: 937-552-2340 Direct: 937-552-2343 1100 Wayne St Suite 1337 Troy, OH 45373 On Jan 13, 2015 10:43 AM, "Chuck McCown" <[email protected]> wrote:
> Now there is a gold nugget to archive. > > *From:* Travis Johnson <[email protected]> > *Sent:* Tuesday, January 13, 2015 8:33 AM > *To:* [email protected] > *Subject:* Re: [AFMUG] Leasing vs Bank Loan > > Hi, > > First, you should know there are 3 different types of leases: $1 buyout, > 10% buyout and Fair Market Value buyout. The only one that you can use to > deduct the entire payment as an expense each month is the Fair Market Value > buyout. Both of the others, you still have to depreciate all the equipment > because the IRS knows you are basically buying it. > > We always did $1 buyout leases, 24 months with $0 up front, on all of our > CPE when we were growing so quickly. The banks were much harder to deal > with, and often wanted other assets in addition to the equipment we were > buying. They will often attach themselves to your business (for example, > they get claim on all your A/R if you miss a payment, etc.). They also > sometimes want your checking account to be with them so they have some > security that way. > > Leasing companies are easy. They charge higher rates, but there are also > tons of them out there, so it's easy to find new companies to get leases > from... banks often only want to do 1-2 deals and then they are done. At > one point, I think we had over 20 leases with about 8 different leasing > companies. The trick is to buy enough equipment at a time that you get the > quantity discount to justify the interest rate, so it comes out the same. > We were buying 250 or 500 packs of CPE each lease ($100,000 worth). Get 2 > or 3 leasing quotes from different companies, and then play them against > each other. You can often save some money that way, because they all want > the business. > > The thing I discovered over the 15+ years of leasing was we reached a key > point in the business where we could just start buying our CPE. We had two > leases pay off within a couple months of each other, and we had the cash > flow, so we started buying 100 CPE each month. It was a very critical point > in the business growth, and I seemed to have timed it perfectly, because we > never ran out of cash (in fact, we always had at least 6 months worth of > capital to cover our expenses). > > Things to watch out for with leasing companies: > > (1) Automatic renewals after the lease term is up. Some companies will > just keep billing you the monthly payment if you don't notify them 90 days > before the term of the lease is up. > (2) Misc monthly fees and "payoff" numbers that are higher than quoted, > etc. > (3) Sales tax. Make sure if they are collecting the sales tax on the > purchase each month that they are actually reporting and paying it to your > state. > (4) The worst company I ever dealt with in those 15+ years was Balboa > Capital. We did over 50 leases during that time, and Balboa Capital was the > only one we ever had a problem with. They have very fine print in their > contracts, and they are very sneaky about what they try and get away with. > > Good luck. It's the fastest way to grow a business and still stay > profitable each month. :) > > Travis > > On 1/11/2015 8:34 AM, Darin Steffl wrote: > > Hey guys, > > As many of you have probably done, we're weighing the benefits and > difficulties of lease-to-own and bank loans and trying to find what will be > best for future growth. What I'm looking for is what each of you decide to > use to fund growth and why you choose leasing vs getting a loan through a > bank. Lease to own is basically like a bank loan but usually at a higher > interest rate but they may be more inclined to lend than a bank for example. > > I understand in our case that we can receive a better interest rate > through a local bank but they make it a bit harder to borrow. I have not > worked with a leasing company yet but from the sounds of it, they may be > more likely to lend money for a successfully growing WISP. If you could > leave a review from any lenders you have worked with, that would be great. > > I'm not an accountant or tax person but with leasing, the payments should > be 100% tax deductible where if we purchased the equipment outright, we > have to depreciate it over it's life (3-5 years usually) so we would pay > more in taxes every year by purchasing. > > To sum it up, I'm looking for your thoughts on leasing-to-own vs. getting > a bank loan and purchasing equipment and your favorite vendors you've > worked with. Thank you all > > -- > Darin Steffl > Minnesota WiFi > www.mnwifi.com > 507-634-WiFi > <http://www.facebook.com/minnesotawifi> Like us on Facebook > <http://www.facebook.com/minnesotawifi> > > > > >
