How is Coffee like Leasing?

Procaffeinating (n). – the tendency to not start anything until you’ve had your coffee…

Coffee and Leasing are similar in many ways. Both are very popular, both have a slight fascination.

Many companies view leasing as old hat, very similar to banks and other institutions. But in reality, leasing has also helped companies grow and expand.

The key is both Leasing and Coffee can be personalized to individual tastes and businesses.

As you know, the strengths of coffee are varied, from Double Espresso, Latte, Macchiato, Americano, all the way to Decaf, in order to suit individual tastes.

Well Leasing is much the same, whatever the equipment, whatever the taste, leasing will help you reach the next stage in your business.

For instance, if you are a start-up, it can help you acquire the equipment you need to start, or as an established company, help you seize other business opportunities, for growth to complete a new order, or to grow your business in other ways. When competition is hard, the key to any vendor program is to minimize the cost objection, and leasing is the perfect and proven answer to this objection.

With business opportunities, “the window” only stays open for a short time. For more information about what you can Lease and how we can get you through that window! Feel free to contact us.

Have a success-filled week!

Debbie

“Who invented the tube sock?”

An article by guest writer, Ryan Dowson…. Mobile Account Executive, Western Financial Group.

“Commercial insurance is… oops, did I lose you already? It’s quite understandable considering it’s the least exciting topic next to 19th century agrarian farming practices and the question of ‘who invented the tube sock?’

Commercial Insurance & Equipment Leasing – Together is Better!

Maybe this will make it more interesting: Catastrophic losses in Alberta alone amounted to $5.03 billion dollars in 2016. This includes payments to damaged or destroyed businesses and property as a result of things beyond anyone’s control. In some cases, even having business insurance isn’t enough unless you know what you are covered for, and under what conditions or terms the insurance company will pay out. 

There are a wide variety of coverages available from property & crime, general liability, business interruption, machinery breakdown, tool expense, and many more. All of these types of coverage are designed to mitigate the day-to-day risks that a business owner either knowingly or unknowingly exposes themselves to as part of everyday operations. Even signing that next big contract with a new customer could put you in a tight spot if your equipment gets damaged, or, even worse, you damage someone else’s property and haven’t checked the fine print of the contract for things like “Hold Harmless” agreements. 

Insuring the assets of your business against damage and loss is the best way to ensure you have a business to come back to tomorrow. After all, those lease payments still need to be made whether or not that equipment is in one piece, or several.  Insure to ensure!” 

By the way, socks have evolved over the centuries from the earliest models, which were made from animal skins gathered up and tied around the ankles. 

Should you have any questions about Equipment Leasing and Financing, I’d be happy to help. Have a success-filled April!

Deb Sands, Priority Leasing

Getting to the Next Level…

When striving to take your company to the next level, it’s important to first set yourself attainable business goals. You should also consider the hurdles that might thwart your progress along the way. Setting reachable key points in your business development enables you to measure your progress and track your achievements.

You should also have a vision of where you want your business to be two, five or ten years down the road.   As the business grows, you may realize the one way to get to the next level quickly is to upgrade your equipment. If our sluggish economy has hampered your finances, leasing can be an effective way to access expensive items that your business needs to flourish today!

Leasing is essentially a method of renting an asset for a period of time and it can help many businesses get to the next level. On this blog we’ll look at some of the key advantages and disadvantages of equipment leasing.

There are basically two types of equipment leasing:

  • Operating Leases,
  • Finance Leases

Between these two forms of leasing , there are many different ways to get new or used equipment for your business.

You can lease almost anything!

Business owners are often surprised by the massive variety of equipment obtainable on a lease. In fact, most catering equipment in restaurants and hotels is on a finance lease, as are many pieces of high-spec plant machinery. Chances are the gaming machine in your local pub is held on a lease too!

Office fixtures and furniture, printing equipment, large coffee machines, commercial vehicles — it’s almost limitless what lenders will offer leasing finance on.

As well as being a good way to access expensive equipment, leasing can also be useful for subcontractors with a series of short term projects lined up, who want a “rent-to-own” option.

Immediate access to the equipment your business needs…

Rather than having to wait for adequate savings or the profit to roll in, leasing equipment means it can arrive at your door within days. You can also get a much higher standard of equipment than you might otherwise be able to afford if you purchased it outright.

Get your budget under control…

Leasing is good for future budgeting, because you will make fixed monthly payments and not be subject to “floating rates”.  Also, depending on your industry, you can negotiate payments that fluctuate with your seasonal income. Finally, installation, training and maintenance agreements can be included in the lease.

A Lease will free up other finance options!

Since the finance is secured on the asset, it’s not like a traditional bank business loan, so you might still be able to borrow money for other business purposes besides new equipment.

Equipment leasing is an efficient way for new-start businesses to get hold of the tools they need. Lenders usually specialize in different forms of leasing, such as finance leasing, lease rental ,operating leases

Priority Leasing has spent 20 exciting years in the equipment financing industry. We are a 100% Canadian owned and operated equipment leasing company servicing clients across Western Canada in Alberta, British Columbia, Saskatchewan and the Yukon. Whether you need equipment for a startup or an established business, we can help you GROW!

You can reach us by calling (403) 216-1930 or via email with our Website’s contact form.

NEARLY 8 IN 10 BUSINESSES USED FINANCING

equipAccording to the U.S. Equipment Finance Market Study:  2016-2017.  The survey also shows that 68 percent of the total value of equipment and software acquired in 2015 was financed and total public and private investment in equipment and software grew 4.0 percent in 2015, to $1.5 trillion.

Key Findings:

Overall Propensity to Finance Increased as Use of Leases and Secured Loans Grew, Share of Cash Purchases Declined.

Highlights include: 

•   Growth in investment in equipment and software is expected to accelerate slightly in 2017, growing at a 3.0 percent rate. By 2020, total investment in equipment and software is expected to reach $1.8 trillion.

•   The market for equipment and software financing is projected to reach $1.24 trillion in 2020.

•   Sixty-eight percent of all equipment and software acquired in 2015 was financed. Of that, 39 percent was leased, 16 percent used a secured loan, and 13 percent used a line of credit. This represents a major shift toward the use of leases and secured loans, which accounted for only 17 percent and 9 percent of the total value of financing in 2011, respectively. This also marked a significant shift away from lines of credit, which accounted for 29 percent in 2012.

•   While banks share of financing activity has decreased, they remain the primary lenders across all equipment types. Non-bank lenders’ share of equipment financing includes 30 percent for manufacturers and vendors and 16 percent for non-bank independent financing companies. .

•   Banks continue to focus their new financing efforts on companies with lower risk profiles. The share of bank financing of highly profitable companies (profit greater than 20 percent of sales). Meanwhile the share of bank lending to unprofitable companies declined to only 26 percent, as less profitable companies were forced to seek alternative financing options.

•   The share of cash purchases declined for companies of all sizes from in 2015. Low interest rates, strong competition among lenders and abundant liquidity have made financing equipment acquisitions especially attractive as lenders compete to offer the best rates to borrowers.

•   The 2016 Foundation survey confirms that larger ticket purchases are financed to a greater degree than smaller ticket purchases.

From computers and heavy machinery to complete offices, it is possible to lease almost anything for your business and as you can see above, more and more business owners are realizing the benefits of leasing their equipment.

“Buying things can feel good. We all know that.”

Many executives with knowledge of the leasing and finance industry indicated that customers are increasingly asking for managed solutions or bundled services and usage-based products. They understand that advantages include getting your hands on needed equipment without paying the cost up front.

Lines of credit stay freed up because the leases are not bank loans, and lease payments can potentially be deducted as a business expense. It is also possible to easily upgrade equipment once a lease expires.

Recently I was chatting to a business woman (a blogger) who had to upgrade her equipment.  She mentioned she paid $2,600 for a top-of-the-line Apple MacBook Air and then said to me “I already know that after a year or so I’ll get the itch to upgrade, at which time I’ll shell out another couple of thousand dollars for the latest model.”  I asked her if she ever looked into the benefits of “Leasing” her top-of-the-line computers.  She mentioned it was something she’d always avoided, mainly because she doesn’t like the idea of not owning her equipment.

I assured her I understood her “need to own” mentality but also reminded her how computers and other devices age quickly. When you buy, you’re stuck with outdated technology after a year or two. When you lease, you’re able to exchange a piece of obsolete equipment for the latest model once the contract expires.

I mentioned a few other benefits of leasing including the tax benefits which immediately caught her attention as a self-employed writer.  Often lease payments can be deducted as business expenses (without the messy depreciation calculations).  I also mentioned about “low costs in the short term”.  By leasing, you get the tools for your business without paying the full cost upfront. Payments are regular and fixed which makes budgeting easy.

After our conversation, she called back a few days later and said she had an epiphany. The question she will ask herself whenever it comes to acquiring new equipment going forward – will be…: “Would I buy this at a rummage sale five years from now?” More often than not, the answer is no. And if that’s the case, it’s not something I need to own (but if I still want it, maybe leasing is the way to go).

She added “Buying things can feel good. We all know that. But now that I’m armed with a more businesslike approach to my purchasing decisions, I can hold my impulses in check whenever there’s something I need (or simply want) for a job or contract but will likely never use again. Done right, this approach should leave me with more money in my retirement account–and a lot more space in my office storage room.”

Businesses‘ choose Priority Leasing because they can acquire the capital equipment they need at a low, fixed monthly payment. With Priority, you choose the equipment and vendor – we provide the financial support. We have the resources to make the process simple for you and beneficial to your budget!

Contact us today to see how we can help you!

 

Fitness Equipment, Should I Buy or Lease It?

Most gyms allocate an average of 60% of their floor space for strength and cardio equipment. Industry metrics can be helpful in determining the right balance of floor space to use for cardio and strength equipment and there are great tools available online to help you plan your gym space, but deciding on the right equipment for your gym can be a major endeavour and have a serious impact on your budget and operating expenses going forward. Commercial fitness facilities and corporations creating gyms for their employees can lease or buy the new equipment. Here are some helpful fitness industry benchmarks, tools and insights into leasing versus financing or buying, followed by some local resources.

Plan your Gym Space Carefully

Gym Equipment Lease or Buy?According to Precor, 40% of the typical fitness facility is allocated to reception area, locker rooms, hallways and other non-exercise areas. Of the remaining sixty percent, 47% is allocated to strength equipment, 33% to cardio and 20% to group exercise space.

You can use the Cybex Gym Planner (link below) to create 2D and 3D plans for your space. This planner lets you visually create your space and then allocate the types of strength and cardio equipment such as Elliptical Cross Training Machines, Treadmills, Rowers, Stationary Bikes and Step Machines to scale on the floor space.

Determining which equipment you need is only part of the equation. The other question to ask is will you be better off in the long run paying cash, taking a loan or leasing the equipment?  Going with a gut feel or doing things the way you always have may not be the best method. Perhaps consult a tax advisor to understand the best strategy before you finalize the purchase and avoid possible disappointment later, at tax time, or when you decide to upgrade the equipment.

To Lease or Buy Your Gym Equipment?

In addition to deciding on the types and quantities of equipment you’ll need for your gym, it’s a good idea to understand the pros and cons of leasing versus buying the equipment. Here are a few considerations to keep in mind and to discuss with your advisor.

1.     Keeping your gym’s equipment modern and up-to-date

If you have operated any kind of gym or fitness facility you know it’s important to have modern, up-to-date equipment. Every few years, new machines are developed and become the latest craze in demand by gym members (stair climbers replaced by elliptical machines!). Cardio equipment manufacturers are continually improving their equipment lines, adding new computerized features, technologies, sensors and devices. If a competing gym offers more current fitness technology than you, it may be enough to send prospective members to your competition.

Usually it’s a good idea to match the lease term to the length of the equipment warranty, often three years. Why? Because it can only take a few short years to show ware and become visibly outdated. If you choose to upgrade your equipment on a regular basis, you may avoid repair costs that may otherwise not be covered under warranty.

Usually it’s a good idea to match the lease term to the length of the equipment warranty

The rate at which fitness equipment evolves can make keeping up painful. The balance between maintaining your gym’s competitive edge and a healthy balance sheet can be a worthwhile exercise!

2.     Turning equipment over and dealing with the used asset

As we discussed in the previous point, eventually your gym’s equipment will become outdated or start to show it’s age. Leasing can take the pain out of updating equipment. This is largely because fitness equipment is a depreciating asset. If it appreciated, owning the equipment would make more sense because it would be worth more at the end of the loan or after you paid cash.

The flexibility to upgrade your fitness equipment on a regular basis without increasing costs or having to deal with obsolete equipment are some of the main reasons gyms utilize leasing to finance their equipment. At the end of the lease term, you can exercise your option to return the old equipment to the lessor, no questions asked, and / or order new equipment to be financed using a similar formula. You many also elect to buy it out at a predetermined value. In Canada, we write most of our gym equipment leases with a $10 lease end buy out but sometimes they can be written with a fair market value buyout or a buy out based on 10% of the original purchase price. At this point you are free to order new equipment, and your lease payments usually stay around the same. As long as you have made payments on time, your leasing company will be happy to provide you with a new lease.

In Canada, we write most of our gym equipment leases with a $10 lease end buy out

To sum up this point. When it’s time to upgrade … if you bought the equipment you will need to either sell it or dispose of it. If you leased the equipment, you have two options, you can return it to the leasing company, or buy it out at a low predetermined price.

3.     Paying LESS taxes

When you lease equipment for your commercial or corporate gym, you’ll be able to write off 100% of the lease payments from your taxable corporate income. Compare this to buying the equipment, and only writing off the depreciation each year. This means referring to tax tables that list set depreciation rates on a yearly basis and then calculating the depreciation based on the remaining value from the previous year. Yes, it can get a little complex. The main takeaway is that leasing is a 100% write off, while buying or taking a loan is only a partial write off.

leasing is a 100% write off, while buying or taking a loan is only a partial write off.

For example, if you want to own your equipment and take a loan for equipment that depreciates by 25% per year, you get to write off 25% of your loan payments for that year. As mentioned, with leasing you can write off the entire payment.

If you choose to buy the asset (equipment) at the end of the lease, and then resell it, you add the sale amount back to the value of the equipment before you calculate the deprecation. For more information about writing off depreciation in Canada see the source links below or consult your tax advisor.

4.     Keeping your access to credit open

When using leasing to finance your equipment, you can treat payments as an operating expense instead of a capital cost. As such, they do not appear as a liability which may support other requests you make for credit.

Popular Types of Cardio Equipment You Can Lease and Where To Get It

The types of equipment we lease the most include:

  • Elliptical Cross Training Machines
  • Treadmills
  • Rowers
  • Stationary Bikes
  • Step Machines

In Western Canada, popular places to order equipment for your commercial or corporate gym include:

In one of my next posts we’ll take a closer look at the financing of fitness equipment and different lease types, so stay tuned.

Sources referenced:

Cardio Equipment Leasing Strategies for Fitness Centers

http://www.athleticbusiness.com/budgeting/cardio-equipment-leasing-strategies-for-fitness-businesses.html

How to Choose Fitness Equipment for Your Gym

http://www.precor.com/en-us/blog/2015/04/22/how-to-choose- fitness-equipment-for-your-gym/

Writing off depreciation on equipment you purchase:

http://www.taxplanningguide.ca/tax-planning-guide/section-1-businesses/calculating-depreciation/