Commercial Finance Blog

UncategorizedDecember 31, 2007 3:25 pm

10 Small Business Finance Tools

10 small business finance tools that were recommended by Rich McIver of performancing.com:

  1. Mint.com

    Mint is an extremely new online program that quickly integrates your bank accounts and breaks them down in order to show you where you’re spending your money. I’ve only been using this for a couple of weeks and already found myself relying on it heavily to plan out my personal and business savings. As an aside, this service is ridiculously easy to setup, so even if you don’t have a lot of extra time, this one may be worthwhile.

  2. The Perfect Calculators

     

    I’m in love with the CCH Calculators. They’re the small businessman’s version of an actuary. I use them to plan out the feasibility of taking on a new loan, the long-term expected ROI on a short term project, or just to play around with things like my retirement plan. Literally everyone I’ve shared my enthusiasm for these things hasn’t felt the same, so I don’t blame you if you disagree. But I would encourage you to go ahead and spend a few hours with these calculators just because putting hard and fast numbers to your ideas is a good way to weed out the really crummy ones.

  3. Quickbooks OE

     

    This is the mother of all small business finance tools. The online edition is frequently updated and will pull in all of your various business accounts (with the notable exception of PayPal). I use this tool to constantly have great documentation of all our company’s activities and it saves me a lot in year end accounting fees, b/c everything is done for me.

  4. Wells Fargo Payroll Services

     

    Not so much an online tool as an online service, Wells Fargo payroll service is the cheapest on the market (at least among the 5 different services I quoted). Having checks made out and sent through them is not only a lot more professional than signing your own checks, it also saves a ton in end of the year accounting fees because they keep track of all of your withholdings and prepare your quarterly tax returns for you.

  5. Continental’s Frequent Flyer Program

     

    I live and work out of Houston (which is Continental Airlines hub) so that program works really well for me, but you can basically find an airline rewards program for whatever company is biggest in your city. I only fly about twice a month, but since I always do it with the same airline that’s enough to get me free first class upgrades almost every time I fly, and I get to bring a free guest on some of my flights. I know that a airline rewards plan isn’t specifically a finance tool, but it is a means that I rely pretty heavily on to make my business’ travel dollars go a lot farther.

  6. Basecamp

     

    I realize that its trite to rely on Basecamp, and I sort of hate the fact that I give them $20 something dollars a month to use their software, but using Basecamp has literally saved our business thousands by keeping us organized. I’d suggest that you setup a number of different projects and different to-do lists for each site rather than trying, as most users do, to utilize just a single to-do list.

  7. Freshbooks

     

    Again, it isn’t original, but it is vital. I used to rely heavily on freshbooks for invoicing and time tracking. While I use the service less now that the company has grown, it remains one of the only tools designed for small business owners that actually works the way its supposed to.

  8. Google Docs & Spreadsheets

     

    Why are you still using MS Word and Excel. If you’re a small business, especially an online business, there’s usually tons of collaboration taking place between people in different offices. I use Google Docs and Spreadsheets on a daily basis to collaborate when researching new domains or website niches, as well as to collectively draw up specs on a new project.

  9. My Small Business AMEX Card

     

    I originally thought that only millionaires had AMEX platinum business cards. Not true. Basically if you have good credit you can get one no matter how small your company is. The benefits are a lot better than any other comparable card in terms of the travel rewards as well as the fact that you get into the executive lounges in all major airports for free (many have free liquor BTW). From a finance perspective, AMEX also prepares a complete end-of-year rundown for you for free which provides you with a good foundation if you plan on doing your own taxes.

  10. Top Blogs

     

    There are a number of really bad small business finance blogs on the internet. Thankfully there are also a few really good ones.

Obviously there are different tools that work for different people and different companies. So take the 10 recommendations I’ve made with a grain of salt. They’ve worked for me, but all I can really say is that you should consider giving these a try because I can attest that they’re proven techniques for getting a handle on your small business finances.

Happy New Year!

Comments (0)
Business Financing, Equipment FinancingNovember 28, 2007 3:58 pm

Equipment Finance Association Survey

The Equipment Leasing and Finance Association’s 1/ (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports equipment finance activity showed that overall new business volume for October was virtually flat (0.10%) when compared to October 2006. However, according to year-to-date cumulative totals, new business volume for January to October 2007 was 6.5 percent higher when compared with the same period in 2006.

Equipment Leasing and Finance Association’s Survey of Economic Activity: Monthly Leasing and Finance Index   

Comments (0)
Equipment FinancingNovember 19, 2007 4:32 pm

Section 179 Copier Example

Here is a recent posting of how Section 179 was leveraged in the copy machine business:

"Special thanks to a member of the Print4Pay Hotel, who reminded me of the Section 179 of the IRS Tax Code. I’ll use his quote here. "Time is limited as the asset must be placed in service by the end of the year. Your customer can capture this deduction under a dollar out lease thus getting a size able reduction in tax liability for 2007 without any money out of their pocket".

There are many small business owners who either forget or are unaware of the advantages of IRS Section 179. Our job is too remind them of the special advantage at this time of year. Personally, I will use this close to give my customers a sense of urgency to buy before the end of the year."

Arthur Post goes on to assert that business marketing efforts should be constantly on the move and that IRS Section 179 will allow any business to do just that.

Close End of The Year Copier Sales with Section 179

Comments (0)
Business Financing, Credit, Equipment FinancingNovember 15, 2007 6:51 pm

Section 179 – Letting the Government pay for your Stuff

I have gotten some questions regarding my last post on section 179, mostly what types of equipment applies?

Excerpt:


"Before you start scratching your head while scrolling down the page looking for sections 1 through 178 I am referring to the US IRS Code.

It’s day 2 of the 4th quarter rush and a lot of the new recruits have no idea why it gets so crazy in the office during this time. Most have to do with the general flow of business Equipment Seller are sending out promos to try and move inventory for a strong year end close; while one of the other major reasons is the tax benefits associated with financing during this time.

Technical… Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows businesses to immediately deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible personal property such as equipment and vehicles. Buildings are not eligible for section 179 deductions. Depreciable property that is not eligible for a section 179 deduction is still deductible over a number of years through MACRS depreciation."

"Certain types of property": Well the truth is it can be anything from printing presses and machine tools to Hummers and Navigation units (Of course all for business use. ‘Essential use’ is a pretty vague definition.).

If you have further questions simply ask anyone wearing a bowtie.

Next time I will discuss the finer points of frying a turkey.

 

Related

 

Qualifying Equipment

 

Section 179 Calculator

Comments (0)
Uncategorized, Business FinancingNovember 1, 2007 10:27 pm

Residuals (continued)

In a prior post I covered the difference between apples and oranges and how oranges taste so much better. Never mind that was on another blog, I did however cover the differences between a lease and a loan and as promised I wanted to clarify some of the common residual types.

 

In review…

 

A Lease by nature has to have some type of residual at the end; imagine a residual to be a portion of the original cost that is left unfinanced. Common residual options include but are not limited to $1.00, 10% and FMV. Each of the options can be coupled with the words “Purchase Agreement” or “Purchase Option”. (Remember this for next time.)

 

$1.00 Residual: this is typically the most common type of lease to purchase structure. In this agreement the customer is financing all of the equipment cost minus $1.00. (Now obviously the $1.00 residual is somewhat of a technicality that qualifies this as a lease structure) This structure yields the highest monthly payments but also a next to nothing residual at the end.

 

10% Residual: in the case of a 10% residual the customer is financing 90% of the equipment cost leaving the remaining 10% as a residual at the end of the term, hence the name. This structure has a lower monthly payment than a $1.00 for obvious reasons but also has a 10% Residual or “balloon” payment left at the end of the term, which in most cases can be financed again, or of course paid in full in cash.

 

FMV Residual: though not difficult to understand this structure typically is difficult to explain so I will reserve this for a later date and time.

 

Stay tuned while I formulate my thoughts on explaining the difference of a purchase option versus purchase agreement and the infamous FMV.

 

 

Related Articles and Links:

 

Residual Types

 

 

 

Comments (0)
Uncategorized, Business FinancingOctober 24, 2007 1:24 pm

Fast Financing Options for Small Businesses

Cash flow is essential to the life of any business, big or small.  Proper allocation of cash resources will allow a business to flourish.  When revenue generation is at a lull, a business may need to seek funding options to ensure steady growth without interruption.  There are many quick financing options available to businesses.  The funding can be used for purchasing, refinancing, business expansion or for any development purpose.

Traditional Methods
Depending on the size and type of business, peer-to-peer and personal loans may be practical.  There is a plethora of resources on the web if personal contacts do not suffice.  Another traditional loan option is through a bank, however, institutionalized loans can take anywhere from weeks to months to process.  It may also be difficult to obtain one of these. 

Secured & Unsecured Loans
Other types of loans are the low rate business loans which come as secured and unsecured.  Unsecured loans do not require collateral but may charge a higher interest rate.  Secured loans are issued with the lowest rate of interest determined against a valuable asset the businessman owns.  Depending on the value of that collateral, the loan amount is determined.  Business owners with poor credit may also qualify, but with a higher interest rate.  In the case of non-repayment, the loan issuer gains the right to sell off the security to the asset.

Factoring
Invoice Factoring may be an option for companies that have clients with pending termed invoices.  Instead of waiting for the terms of payment, the business can factor the invoices, receiving payment from a funding source in as little as two days.  The invoices then become an instant capital source.

Purchase Order Financing is another great option for resellers and wholesalers.  Purchase order financing provides instant funds necessary to pay off suppliers through a letter of credit.  This allows a company to fulfill its supply requirements and move forward to selling to its own customers.

Equipment Financing
In the recent years, Equipment Leasing and Financing has become a booming industry in itself.  Through leasing and financing equipment, businesses can slowly pay for expensive equipment over time allowing them to hold onto valuable cash resources.  By leasing, business profit can grow without the burden of debt.  There is also a myriad of benefits to equipment leasing and financing including tax benefits, specialized product selection and maintenance, and more.

Online loan and financing providers are constantly competing for your business. The online application has evolved a great deal over the past years, allowing for better rates and speedier processing time for the funding seeker.  This may be a viable resource for those searching for a way to quickly acquire funding for their business operations.

Comments (0)
Business FinancingOctober 18, 2007 4:58 pm

Leases and Loans the Difference between Apples and Oranges

Because leasing has such a wide definition I am specifically talking about lease purchases; where the intent is to purchase the equipment at the end of the term.

What is the difference between a Lease and Loan? This is a pretty broad topic so I will try to cover it in bite sized chunks.

Technical…

Equipment Loan: is where the Lender (the party that is providing the money) is loaning out a specific sum of money to the Buyer (the party that is purchasing the equipment), that is to be applied towards the purchase of a piece of equipment. The Buyer purchases the equipment in their name and the Lender then files a UCC or Lien on the equipment until the agreed upon payments have been made.

Equipment Lease: is essentially a rental agreement. The Lender buys the equipment on behalf of the Buyer and after the agreed upon payments have been made the Buyer then can purchase the equipment for a predetermined residual amount. (Common residuals include $1, 10% or FMV, to be covered at a later date)

Real Life…

In short the difference between a Equipment Loan and a Lease is the ownership of the equipment during the course of the payment plan. Also a Lease by nature has to have some sort of residual at the end of the term.

 

Related Articles and Links:

Residuals

Comments (0)
Business FinancingOctober 2, 2007 8:21 pm

Section 179

Before you start scratching your head while scrolling down the page looking for sections 1 through 178 I am referring to the US IRS Code.

It’s day 2 of the 4th quarter rush and a lot of the new recruits have no idea why it gets so crazy in the office during this time. Most have to do with the general flow of business Equipment Seller are sending out promos to try and move inventory for a strong year end close; while one of the other major reasons is the tax benefits associated with financing during this time.

Technical… Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows businesses to immediately deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible personal property such as equipment and vehicles. Buildings are not eligible for section 179 deductions. Depreciable property that is not eligible for a section 179 deduction is still deductible over a number of years through MACRS depreciation.

Example: Purchase price $125,000

  • 1st Year Write Off:  $112,000
  • ($112,000 is the maximum Section 179 write-off in 2007
  • Normal 1st Year Depreciation: $ 2,600
  • ($125,000-$112,000 = $13,000 x 20% = $2,600)*
  • *Depreciation calculated at 5 years = 20%
  • Total 1st Year Deduction: $ 114,600
  • ($112,000 + $2,600 = $114,600)
  • Tax Savings Assuming Rate of 35%: $ 40,110
  • ($114,600 x .35 = $40,110)
  • 1st Year Savings / Lowered Equipment Cost: $ 84,890
  • ($125,000 - $40,110 = $84,890)

 

Real Life… You can write off up to $108,000 of the equipment cost the year you purchase it.

Easy Example: Purchase price $125,000

  • *Magic Happens…*
  • Save $ 40,000 on your taxes!

Related Articles and Links:

Section 179

Comments (0)
UncategorizedOctober 1, 2007 4:38 pm

Free Money

Is there such a thing as free money, the answer is simply… yes and no.
Not so simple right? Well what in life is…

It is officially day one of the 4th quarter, and if you watch any amount of TV you’ll start to see commercials for cars being financed at 0% interest.

T.I.N.S.T.A.A.F.L. (There Is No Such Thing As A Free Lunch): which isn’t to mean you shouldn’t take it. Officially the way 0% financing works is there is a blind discount to the customer that the seller of the equipment either overcharges on the invoice or discounts to the finance company for an apparent rate of 0%.

In plain English: If I am selling a tractor, or a truck, or even a printing press for $60,000 and decide that to help move inventory I am going to offer 0% to the customer; I need to first decide if I am going to raise the invoice price or take a hit on profit.
If I decide that I want to offer a 5 year term (60 months) at 0% interest than the customer thinks they are financing $60,000 for 60 months:

$1,000 * 60 months = $60,000

However behind closed doors the equipment seller is asking the finance company for only $55,000, while the finance company is collecting $60,000 worth of payments.

$60,000 - $55,000 = $5,000 (profit for the finance company)

In essence free financing is not so free, someone is always paying for it. If the seller of the equipment is taking a hit on profit to offer free financing than take it, the opposing side would be that the equipment seller is merely using free financing as a sales tool and raising the invoice price of the equipment beyond what is considered fair market value.

Be cautious of free financing if what you are buying cost less elsewhere.

Comments (0)
Business FinancingSeptember 30, 2007 9:08 pm

To Whom am I speaking?

I called a friend of my last night and his 5 year old daughter answers and said "To Whom am I speaking?" I just about busted out laughing, I digress.

Mr. *Mysterious Online Personality* who are you and why are you blogging? Well the first question is easy; the second question has to do with sanity of mind during the work day, but out loud let’s just say that I enjoy educating people.

I am the sales manager for a capital equipment finance company and have been doing ‘this’ for going on 18 years now. I get asked politely when I meet new people if I enjoy my job, and the truth is yes, yes I do. However realizing that most people in general have very little idea as to what I do; in retrospect I think a proper introduction is in order, especially if I am spouting out advice into the abyss that is the World Wide Web.

I wrote once in a college paper oh-so-many-years-ago that finance, next to harlotry, is one of the oldest businesses in the world. In short I sell money by partnering with equipment sellers to be offered as a payment solution at the point of sale.

We work with a variety of industries, everything from printing presses and machine tools to being one of the few equipment finance companies that will do prepackaged and custom software solutions.

I spend most of my days training instead of selling and thought I could use this blog as an idea journal to both archive my thoughts as well as maybe pass along knowledge to the general masses of small and medium sized business owners in the search for financing equipment.

Comments (0)