Episode 45 – Equipment Leasing with John Sullivant
We spoke with John Sullivant about leasing equipment. Why you should or shouldn’t and what the benefit are as opposed to buying the equipment outright. It’s such a common question from our customers.
You’re a guy that actually understands the business and the equipment that people are talking about and trying to finance. As well as being able to handle the money side. As we talk to people on this podcast you find there’s a lot of people with experience across the board, because there are so many facets of this industry.
One of the things we picked up from our last conversation is ColDesi customers lease a significant portion of their equipment. Is that something you see across the industry John?
So when someone leases equipment from you, that’s not really part of their other business relationship with their bank. If someone wants to get a multi-head embroidery machine and they set up a lease with your company, that’s not going to affect their line of credit with their bank.
For some of our customers who might not be as sophisticated with business and don’t know what a balance sheet is, those are typically the things for business that you have to provide to a bank if you’re going for a loan. You have to say “Here’s all the equipment that I own. Here’s the debt attached. Here’s how much I’m making.”
When I used to sell equipment I would have folks who were debating what they were going to do. “I’ve got some cash. I’ve got these two credit cards with 0% interest for the first year. I’m considering financing.” I would tell them that all that’s great but you need to talk to the leasing company first, because you have to consider that you’ve got this credit card that’s at 0%, which is great, however that’s money that you can access instantly at any time. You want to consider, do you want to take this $15,000 that you’ve got available and use 90% of it in a revolving debt? Is that the best financial decision? It may be for some people, but often times if you can lease it I would tell people, let your equipment finance person handle that. Take that money that’s available now and save that for when you need it tomorrow.
One of the things we talk about in blog posts and in podcasts is that cash is hard to come by. If you have $10,000, or saved up $25,000 to start a business, then it’s going to be a while before you can build that safety net back up. That big order can be a business killer if you’re not prepared for it. You get that order from a university or big business that wants 500 shirts. You’re going to have to buy those shirts or whatever they are. You’re going to have to spend the labor to get those shirts made. You’re going to need the supplies. You’ll want to get a percentage extra in case some in the order are wrong. All that time passes and then you’re going to send these big companies an invoice and they’re going to pay you when they like. So that second big order you get, you might not be able to fill. Perhaps that company doesn’t pay you for 60 or 90 days, and you don’t have the cash.
“But I don’t want to pay interest on equipment if I can just pay for it in cash.”
You’ve talked about the tax advantages of leasing, and being able to write stuff off. A lot of our customers who have never been in business themselves, really don’t have an idea of what that means.
When you talk to a good rep at any company when you’re buying equipment, you’ve got to work with people who know what they’re talking about. And can fill in those holes for you. If you’re already in business, and have been for a couple of years, and you want to look at adding equipment, or if you’re just starting, you have the opportunity to work with someone who has your best interest at heart. When you talk to a good leasing company or financing company they key is that you’re getting the right advice that will benefit your business. When you buy something from Coldesi, we do things, like these blog posts, to help you be successful, because we sell other stuff. We want you to grow and buy a DTG printer or a rhinestone machine. John’s kind of in the same boat. He wants to give you the right fiance deal on whatever you’re looking at because he knows that if you do that right and he can answer the questions for you, that you’ll be back to lease more equipment.
If you pay cash for your equipment right now, when you go to do your taxes, the government’s going to want to take certain amount from you. You have a brand new business and you basically earned nothing. They’re going to want to take basically nothing from you. However in three years time, or twelve months, whatever it might be you’re going to earn money and it might be enough where the government wants to take a nice chunk. Having the Section 179 and the lease gives you the opportunity to say, “hey you know what government, I’m going to put a block card on those taxes, because I don’t want to pay that today.” I’m going to go ahead and use this money that I invested in equipment as a business expense, and I can use all of that right now, or I can continue to use pieces of it over time.
Also the value of that equipment with wear and tear and age, will change over time and the government says you’re allowed to reduce the amount of taxes you pay based on some of that as well.
What kind of credit do you actually need to lease equipment?
There’s no harm in getting a pull on your credit. And even if you don’t get approved, John and his team could probably tell you a few things you can do that will allow you to get a lease next year.
How about an down payment? If someone had poorer credit, if they had cash to put down does that make them more likely to be approved?
What is the smallest amount of money someone can finance?
What about when they’re combining things together? What if they are buying an embroidery machine and a heat-press machine?
Can someone assume a lease?
How does it work if someone is looking to sell their business possibly? And there’s lease equipment in it. Is that the same answer?
What if someone is coming up on a large sum of cash, what about paying off that debt?
What happens if I can’t make a payment?
Is there anything you would like to talk to people about that we did not ask you?
There’s a lot of advertising out there for 0% financing. Can you talk to that for just a moment?
Hopefully this really opens up your mind. And let us know if you have any more questions for John. You can also give him a call 866-757-0244, or send him an email email@example.com
Have a good business!