When to buy or rent heavy equipment

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You’ve decided it’s time you need some heavy equipment or trucks. Maybe you’ve got some big contracts coming down the pipe, you’re growing or expanding your company’s capabilities, or you just need to replace your current heavy equipment. So how do you decide when to buy equipment and trucks and when to rent what you need? Premier Business Lending has helped business owners answer these questions for years.

With pros and cons to both renting and buying, it pays to evaluate your company’s current situation and capabilities (financial and otherwise), your future, and carefully consider which method of acquiring equipment will be most advantageous to your business – and which is also simply going to make your life easier. Certainly, initial cost is a major factor in the decision process, but it’s not the only one – there are several things to consider when it’s time to gear up – usage, availability and more.

Here’s an overview of some of the things you should bear in mind before deciding when to buy and when to rent equipment.

1. Current financial situation

This seems like the most obvious factor to consider – do you currently have the capital to buy or is renting a better option for now? But you should look beyond your current situation and project your costs over several months or years. Although buying may be a larger one-time financial outlay, the cost of renting can add up quickly, and over a long period can end up costing you more – especially if the equipment isn’t being used for the entire rental period. And don’t forget: when you own, you can see a return on your investment when you sell. You can reduce the initial financial impact of buying a piece of equipment in many ways:

  • Buy good quality used equipment – when you rent, you are often paying for the newest equipment with the latest technology; purchasing well-maintained used equipment can be cheaper than buying new equipment and may be more cost-effective than renting over the long term
  • Finance your equipment purchase – give your company some extra financial breathing room by financing your equipment purchases and keeping your capital to run your business; with financing rates as low as 4.5%, your payments could even be lower than rental payments with Premier Business Lending.

2. Cost of Buying vs Cost of Renting

3. Length of project or job frequency

Of all the things to consider, project length or the frequency of jobs on the calendar could be the deciding factor in whether you rent or buy equipment. If it’s a short-term job, or you need a specialized piece of equipment for a one-off job, then renting may make more sense. The risk, of course, is that if the machine isn’t being used for the entire time it’s rented due to changes in the project schedule or unforeseen hold ups, then you’re spending money on a machine that’s sitting and waiting, not making you money.

  • If you’re working on a long project, or if you’ve got several jobs on the horizon, then buying probably makes better sense given that rental costs add up quickly the longer a job goes on. And a multi-purpose piece of equipment (loaders, excavators, skid steers, forklifts, trucks etc.) that can be used for various projects is a great asset on any jobsite.

4. Equipment availability & usage

  • The big advantage of owing your own equipment is that it’s available to you 24/7 – “if you own it, you control it”, as the saying goes. You can react to unexpected changes in projects or project schedules, take on jobs at a moment’s notice and complete projects with less downtime.
  • Before you decide whether to rent or buy, you should weigh the potential risk of a rental company not having the machine you need when you need it. Owning can be a plus to potential clients too, who see it and know you’re not only equipped to take on their job, but are a going concern and a stable, trustworthy business.

5. Fleet management and inventory control

  • Managing your equipment is also something to consider. If you have the skills and the time, you can save money over the long haul by buying some or all your equipment and taking care of insurance, maintenance, etc yourself; if you don’t, you may want to pay a little extra to rent. You’ll know where it is, who’s running it, and you can schedule jobs and equipment accordingly.
  • For shorter term jobs, you may want to consider renting, but buying gives you added flexibility. Let’s say you project that you’ll need a piece of equipment for three months. If the job extends for another two months, you have the machine at your disposal. If the job ends and you decide you don’t need it, we can help, you sell it again at another upcoming auction and recoup some of your investment. The frequency of our unreserved auctions in different locations gives you a great ability to control your inventory, and even profit from equipment you don’t need anymore.

Pros and cons: buying versus renting equipment and trucks

Renting Buying
  • ✔ Lower initial investment
  • ✔ Access to a broader range of equipment at all times
  • ✔ Latest equipment usually offered
  • ✔ Maintenance, insurance etc. handled by another party
  • ✔ Cheaper over the long term
  • ✔ Get a return on your investment when you no longer need the equipment
  • ✔ More flexible—equipment available whenever you need it
  • ✔ Less downtime
  • ✔ Possible tax advantages

 Leasing: The Benefits

  • Leasing keeps your equipment up-to-date. Computers and other tech equipment eventually become obsolete. With a lease, you pass the financial burden of obsolescence to the equipment leasing company. For example, let’s say you have a two-year lease on a copy machine. After that lease expires, you’re free to lease whatever equipment is newer, faster and cheaper. (This is also a reason some people prefer to lease their cars.) In fact, 65 percent of respondents to a 2015 Equipment Leasing Association survey said the ability to have the latest equipment was leasing’s number-one perceived benefit.
  • You’ll have predictable monthly expenses. With a lease, you have a pre-determined monthly line item, which can help you budget more effectively. Thirty-five percent of respondents to the Equipment Leasing Association’s survey said this was leasing’s second-highest benefit.
  • You pay nothing up front. Many small businesses struggle with cash flow and must keep their coffers as full as possible. Because leases rarely require a down payment, you can acquire new equipment without tapping much-needed funds.
  • You’re able to more easily keep up with your competitors. Leasing can enable your small business to acquire sophisticated technology, such as a voice over internet protocol (VoIP) phone system, that might be otherwise unaffordable. The result: You’re better able to keep up with your larger competitors without draining your financial resources.

Buying: The Benefits

  • It’s easier than leasing. Buying equipment is easy–you decide what you need, then go out and buy it. Taking out a lease, however, involves at least some paperwork, as leasing companies often ask for detailed, updated financial information. They may also ask how and where the leased equipment will be used. Also, lease terms can be complicated to negotiate. And if you don’t negotiate properly, you could end up paying more than you should or receiving unfavorable terms.
  • You call the shots regarding maintenance. Equipment leases often require you to maintain equipment according to the leasing company’s specifications, and that can get expensive. When you buy the equipment outright, you determine the maintenance schedule yourself.
  • Your equipment is deductible. Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year. With most leases favored by small businesses–called operating leases–you can only deduct the monthly payment.

Northern California has a large variety of options for purchasing equipment and renting equipment. With the economy continuing to rise thanks to much of the success of small business, there is more options today than ever before. So how do you make the smart choice as to who to trust? Premier Business Lending has a strong track record in dealings for equipment leasing and finance. The trusted finance consultants are always a call away and eager to help.

“Construction, Transportation and Trucking equipment has been thriving in 2016, credit windows are opening up once again and it’s great to see” says Eric Jenkins, Senior Managing Partner with Premier Business Lending.

The greater Sacramento Area specifically has seen the construction industry and equipment leasing spike this second part of 2016. This is a good sign for business owners in the construction arena heading into 2017.

What is great about business in Sacramento California and the greater Northern California region

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Small businesses will no doubt play a key role in our economy’s recovery. But one of the biggest challenges for them is getting small loans to make improvements and expand. One local finance company is stepping-up to fill that gap.

The only stain the economy left on Jason Jordan cabinet-making business is wood stain — lots of it.

Jordan did what many couldn’t in the last few years; he not only survived the recession, but thrived through it.

Deciding to open his own business, he did what he knew: cabinets. And when his business outgrew his garage, he needed money to expand. But Jordan says banks declined his loan applications. Then he found Premier Business Lending, which is a turn key financial institution. SBA Loans for start-up, short term working capital loans and Equipment Financing Loans. The Organization lent him a total of $150,000 in the past two years, allowing him to buy equipment to process more orders.

“Thousands of small businesses cannot acquire a loan through a bank. And the bank does not do it because they can’t make money doing it,” said Premier Business Lending Managing Partner Eric Jenkins calls it a financing gap. Premier Business Lending has been filling the gap for years by lending. But it is now expanding the program with $500,000 in new loans, available to any qualifying small business owner in the Sacramento area.

Jordan was able to hire five employees after securing his most recent loan in California, if each one was able to hire just one additional employee, it would solve our state’s unemployment rate immediately. “So the access to capital component, the loan, is the catalyst for job creation across the board,” said Eric Jenkins.

The economy of Northern California, home of Silicon Valley, is steeped in innovation and entrepreneurship. Technology companies including Hewlett-Packard, Apple and Intel had their humble beginnings in this region. The San Jose and San Francisco metropolitan areas ranked third and sixth, respectively, on the 2015 Kauffman index of startup activity, which measures the rate at which new entrepreneurs and new businesses are popping up.

Large and small businesses perform well. Northern California is home to Fortune 500 companies including Oracle, Google and Facebook, but small companies have a place here, too. The state has a network of Small Business Development Centers located throughout Northern California that offer free one-on-one counseling for small-business owners.

The Bay Area is key. Northern California’s economic epicenter is the San Francisco Bay Area. Eight of the top 10 cities on our list are in Alameda, Contra Costa, Marin, San Mateo and Santa Clara counties.

Tourism matters, too. Technology drives Northern California’s economy, but tourism is important, especially for Monterey. All the cities on our list are within a few hours’ drive of major destinations including California’s dramatic northern coastline, Yosemite National Park and San Francisco.

KEY FACTS

  • Sacramento is the capital to the 7th largest economy in the world (California).
  • Sacramento is #5 on the top 10 list of travel-worthy state capital cities chosen by the Readers’ Choice Travel Awards.
  • Historic old Sacramento brings in over 2 million annual visitors.
  • Downtown Sacramento brings in over 175,000 visiting conventioneers, thousands of spectators and well over $50 million in generated economic impacts.
  • The metropolitan area offers more than 150 restaurants and nightclub venues.
  • Sacramento ranks in the Top 15 for America’s “Coolest Cities” per Forbes Magazine.
  • With an array of activities, Broadway Theater, museums, concerts in the park—Sacramento’s downtown brings in 4 million people annually.
  • Over 1,200 registered lobbyists in Sacramento representing hundreds of trade associations.
  • Over $50 million added to the regional economy each year from the entertainment and tourism industry.
  • The new Golden One Center, which opened in October 2016, is anticipated to be a LEED Gold Certified Building.  This would make the Golden One Center the first LEED Gold Certified entertainment venue in California.

Best places to start a business in Northern California data

Horizontally scroll through the table below to see the data

Rank City Population Number of businesses Average revenue per business Businesses with paid employees Businesses per 100 people Unemployment rate Score
1 Emeryville 10,206 1,817 $2,665,028 35.06% 17.8 5.1% 59.27
2 South San Francisco 64,630 4,986 $5,230,835 38.99% 7.71 5.9% 57.67
3 Grass Valley 12,845 2,253 $927,948 43.81% 17.54 6.3% 57.31
4 Burlingame 29,237 4,071 $1,264,273 42.23% 13.92 4.4% 57.19
5 Palo Alto 65,234 10,175 $3,337,259 24.31% 15.6 4.3% 56.06
6 Fremont 218,172 19,240 $6,825,934 22.43% 8.82 5.5% 55.81
7 Monterey 27,939 4,156 $1,383,389 39.05% 14.88 4.6% 55.73
8 Los Gatos 29,809 4,444 $985,035 35.76% 14.91 4.2% 54.77

A GUIDE FOR TODAYS SMALL BUSINESS OWNER

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Before you start applying for a loan, you need to answer several critical questions to help you determine which kind of lender and loan is best for you:

  • How much money do you need?
  • What do you need the money for?
  • How quickly do you need the money?
  • How long will it take you to pay it back?
  • How long have you been in business?
  • What is the current financial shape of your business?
  • How much collateral, if any, do you have to put up for the loan?

Answering these questions will help determine if you should pursue a government-backed loan, a loan or line of credit through a bank, or a cash advance, line of credit or loan from an alternative lender.

 

Premier Business Lending offers many different types of financial products to support its customer base. Eric Jenkins, Managing Partner says: “Every small business owner has different needs at different times. Premier Business Lending’s uniqueness is that we can accommodate much of the marketplace by providing custom fit financing based on each customer’s individual needs. For example: One of our larger Franchisee’s may need a $100,000 SBA product today but will want $150,000 equipment purchase tomorrow.”

Premier Business lending recently helped White Hawk Carriers located in Stockton California secure a $250,000 working capital bridge loan last month. Juana Solorzano, CFO for White Hawk Carriers said “Several times per year White Hawk Carriers may need a cash injection to create immediate cash flow for the Business. Most of our Vendors typically pay us on a net 45 or even net 60. So it is very helpful and makes sense for us to have quick access to capital so we do not stall projects.”

 

There are many finance options available to small business owners today, Jenkins says: “It is important for business owners to have guidance when deciding which financial product will best suits their needs”. Premier’s Finance Consultants are experts in all business lending products. SBA Loans, Conventional Bank Loans, Alternative Financing, Equipment Leasing, Lines of Credit, Hybrid Lines of Credit, Franchise Lending, Start Up Franchise Lending and Merchant Cash Advances. Trying to maneuver through all of this information and financial jungle of our industry can be very intimidating for business owners. When all they are trying to do is make the best decision for their business. This is exactly why Premier Business Lending takes the time to properly train our finance consultants to help consult today’s business owners vs. our competition that for the most part are turning and burning their sales reps and their customers.”

 

Here are the basics of the most common products available for small business owners:

 

SBA loans

Currently, the SBA offers four types of small business loans:

  • 7(a) Loan Program: 7(a) loans, the SBA’s primary lending program, are the most basic, common and flexible type of loan. They can be used for a variety of purposes, including working capital, to purchase machinery, equipment, furniture and fixtures, the purchase of land and buildings, construction of new buildings, renovation of an existing building, to establish a new business or assist in the acquisition, operation or expansion of an existing business, and debt refinancing. These loans have a maximum amount of $5 million, and borrowers can apply through a participating lender. Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.
  • Microloan program: The SBA offers very small loans to new or growing small businesses. The loans can be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery or equipment, but can’t be used to pay existing debts or purchase real estate. The SBA makes funds available to specially designated intermediary lenders, which are nonprofit organizations with experience in lending and technical assistance. Those intermediaries then make loans up to $50,000, with the average loan being about $13,000. The loan repayment terms vary based on several factors, including the loan amount, planned use of funds, requirements determined by the intermediary lender and the needs of the small business borrower. The maximum repayment term allowed for an SBA microloan is six years.
  • Real estate and equipment loans: The CDC/504 Loan Program provides businesses with long-term fixed-rate financing for major assets, such as equipment and real estate. The loans are typically structured with the SBA providing 40 percent of the total project costs, a participating lender covering up to 50 percent and the borrower putting up the remaining 10 percent. Funds from a 504 loan can be used to purchase existing buildings, land or long-term machinery; to construct or renovate facilities; or to refinance debt in connection with an expansion of the business. These loans cannot be used for working capital or inventory. The maximum amount of a 504 loan is $5.5 million, and these loans are available with 10- or 20-year maturity terms.
  • Disaster loans: The SBA provides low-interest disaster loans to businesses of all sizes. SBA disaster loans can be used to repair or replace real estate, machinery and equipment, as well as inventory and business assets that were damaged or destroyed in a declared disaster. The SBA makes disaster loans of up to $2 million to qualified businesses.

Loans from conventional banks and alternative lenders

Banks and alternative lenders offer some similar loans to those offered by the SBA, as well as funding options that the SBA doesn’t offer, including the following:

  • Working-capital loans: Working-capital loans are designed as short-term solutions for businesses in need of money to help run their operation. Working-capital loans are available from both banks and alternative lenders. The advantage of a working-capital loan is that it gives small businesses the ability to keep their operations running while they search for other ways to increase revenue. Some downsides of a working-capital loan are that they often come with higher interest rates and have short repayment terms.
  • Equipment loans: In addition to the SBA, both banks and alternative lenders offer their own types of equipment loans. Equipment loans and leases provide money to small businesses for office equipment, like copy machines and computers, or things such as machinery, tools and vehicles. Instead of paying for the large purchases all at once up front, equipment loans allow business owners to make monthly payments on the items. One benefit of equipment loans is that they are often easier to obtain than some other types of loans because the equipment being purchased or leased serves as collateral. Equipment loans preserve cash flow since they don’t require a large down payment and may offer some tax write-offs.
  • Merchant cash advance: This type of loan is made to a business based on the volume of its monthly credit card transactions. Businesses can typically receive an advance of up to 125 percent of their monthly transaction volume. The terms for repaying a merchant cash advance vary by lender. Some take a fixed amount of money out of a business’s merchant account every day, while others take a percentage of the daily credit card sales. The best candidates for merchant cash advances are businesses with strong credit card sales, such as retailers, restaurants and service businesses. The advantages of merchant cash advances are that they are relatively easy to obtain, funding can be received in as quickly as a few days, and the loan is paid back directly from credit card sales. The biggest downside is the expense: Interest on these loans can run as high as 30 percent a month, depending on the lender and amount borrowed.
  • Lines of credit: Like working-capital loans, lines of credit provide small businesses money for day-to-day cash-flow needs. They are not recommended for larger purchases, and are available for as short as 90 days to as long as several years. With a line of credit, you take only what you need and pay interest only on what you use, rather than the entire amount. These loans are usually unsecured and don’t require any collateral. They also have longer repayment terms and give you the ability to build up your credit rating if you make the interest payments on time. The downsides are the additional fees charged and that they put small businesses in jeopardy of building up a large amount of debt.
  • Professional practice loans: Professional practice loans are designed specifically for providers of professional services, such as businesses in the health care, accounting, legal, insurance, engineering, architecture and veterinary fields. These types of loans are typically used for purchasing a practice, buying real estate, renovating office space, buying new equipment and refinancing debt.
  • Franchise startup loans: Franchise startup loans are designed for entrepreneurs who need financing to help open their own franchise business. These loans, offered by banks and alternative lenders, can be used for working capital, or to pay franchise fees, buy equipment and build stores or restaurants.

The Biggest Reason Banks Deny Loans

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The Biggest Reason Banks Deny Loans to a large number of Small-Business Owners

No one ever promised that the challenges to growing a small business would be small. Entrepreneurs regularly confront issues that can threaten the very core of their companies, not the least of which is difficulty securing the financing they need to run and grow a sustainable business.

Premier Business Lending, a turnkey financial company in El Dorado Hills CA found finding capital is becoming harder for a significant proportion of small businesses despite the wider variety of financing options available. Even though there are more lending options for small businesses than ever before, a crucial step is missing in the process; and no one is paying attention, leaving business owners increasingly frustrated over their rejections for credit lines and loans.

The dream and the reality don’t add up Premier Business Lending discovered a scenario confirmed by a new Creditera survey of 250 small and midsize businesses, which brings to light the struggle around bank financing, small business loans and the rejections small businesses suffer.

The realities small businesses face

The Small Business American Dream Gap Report examined today’s economic landscape compared to a year ago and found that despite the positive outlook for small businesses, nearly three out of 10 small businesses reported finding it harder than in the past to reduce operating costs. A quarter of small businesses, meanwhile, found it harder to plan for unforeseen expenses. Within the previous year, the survey revealed, 20 percent of the small businesses surveyed said they had considered shutting down, primarily because of lack of growth or cash issues.

Those kinds of struggles had led 53 percent of those small businesses to apply for funding or credit lines over the past five years — and more than one in four said they had sought loans multiple times. Yet, 20 percent of those applying over the past 60 months reported being turned down, and 45 percent of those denied said they’d been rejected more than once. The most frustrating finding was that nearly a fourth — 23 percent — of these businesses didn’t know why they’d been denied.

As a result, 26 percent of business owners avoided hiring and expansion because, they said, they were frustrated with trying to access funds. Instead, they ponied up the money from their pockets and personal accounts. Those unable to tap into alternative funding sources turned to personal finances to cover expenses and keep their businesses going, a practice that put them at substantial risk.

In addition, the study determined that the last time the small business owners surveyed had needed funds, 62 percent had withdrawn personal savings, 22 percent had used business credit cards, 24 percent had used their personal credit cards and 10 percent had relied on family and friends. Only 36 percent of those seeking funds had obtained bank loans.

The crucial, yet missing, link

The study revealed that a primary reason small businesses can’t obtain bank loans is their failure to understand their business credit score. Some 45 percent of entrepreneurs surveyed didn’t even know they had a business credit score. And 72 percent didn’t know where to find information about it. Even when they did, more than eight in 10 small business owners surveyed acknowledged that they didn’t know how to interpret their score.

Education and empowerment around creditworthiness is a core issue, and can make or break a small business’s ability to get financing. Many business owners starting out are unaware of business credit, and may do significant damage to their credit without realizing it — primarily by maxing-out personal credit cards and/or credit lines because they believe they have no other choice. This short-term approach leads to significant long-term damage.

Need more information about business credit? Consider the FICO score. Just as every individual consumer has a one based on his or her personal credit record, every business has one developed by the FICO Liquid Credit Small Business Scoring Service — the FICO SBSS score. Banks use this score to evaluate term loans and lines of credit up to $1 million.

The score further rank-orders small businesses by their likelihood of making on-time payments, based on their personal and business credit history, along with other financial data. On a scale of 0 to 300, a small business must score at least 140 to pass the pre-screening process the SBA sets on its most popular loan — the 7(a) loan.

If a business with poor credit history — or none at all — is denied financing, lenders are not required to notify the owner of the reason for the rejection.

It’s crucial, therefore, for business owners to learn about their SBSS score and build credit, with timely payments to vendors and suppliers to keep that score up. Boosting the score may take years for companies with a derogatory or nonexistent credit history, so the process of strengthening creditworthiness needs to begin long before a credit application is submitted.

A number of business credit bureaus will generate a business credit score, including Dun & Bradstreet, Equifax, Experian and FICO. Anyone can purchase a business credit report from Dun & Bradstreet, Equifax or Experian, but it comes at a cost.

Until recently, there was no direct way to access the FICO SBSS score, but Premier Business Lending out of El Dorado Hills Ca while researching for small businesses found that you can now get that number through Creditera’s subscription service. It’s the only place small businesses can get that score online.

Why all of this matters

Ultimately, those who understand business credit are better positioned to succeed. The study found that nearly 40 percent of small business owners who didn’t know their business credit score anticipated growth of less than 5 percent, while nearly three quarters who did, envisioned growth of up to 20 percent.

Another answer to the perplexity surrounding rejected funding came from a revelation in the study about owners’ understanding of credit issues. The small business owners surveyed who understood their business credit scores, the study reported, were 41 percent more likely to be approved for a business loan than those who did not. And they were 31 percent more likely to consider expanding their businesses.

Some 80 percent of those in the know about their scores, moreover, considered their funding process to have been smooth, and half of those owners indicated that they were less likely to turn to personal savings to grow their companies.

Business owners, then, should determine where they stand, and take control of the factors critical to the lenders, credit card companies and even other businesses they work with. When owners understand their scores, they have an easier loan approval experience, are empowered to grow and thrive and help the overall economy thrive. That way, everyone wins.

One of the best tax benefits for small businesses owners just got a whole lot better

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One of the best tax benefits for small businesses owners just got a whole lot better. The federal government provides a significant tax deduction for small businesses that lets owners take advantage of investments in capital expenses, and this year they made the deduction permanent with the recent passage of the 2009-page omnibus spending bill. Called a Section 179 deduction, the now-permanent tax rule allows business owners to deduct the cost of equipment purchases or leasing payments up to $500,000.

Chris Wilcox, Managing Partner with Premier Business Lending, El Dorado Hills Ca based lending company stated “A bulk of our 2016 Equipment Leasing Portfolio has been made up primarily of business’s looking to take full advantage of the $500,000 Tax Benefit by making equipment purchases. By doing so, it helps them create a Tax Shelter for their company.”

In previous years, lawmakers would not pass any tax extenders until the last possible moment of the legislative session, leaving business owners in financial limbo with questions about whether they would be able to deduct more than the lower threshold of $25,000. This typically meant owners couldn’t make definitive decisions on investing in technology upgrades or making much-needed capital investments, since they didn’t know whether government officials would extend the tax deductions. This happened last year, when business owners were left to wonder the fate of Section 179 in 2015 right up until mid-December. The total cost of these Section 179 tax extenders will cost $622 billion over the next 10 years, The Hill reported.

While politicians again waited until the final seconds to pass the current extension by adding it onto an omnibus spending bill, by making the $500,000-deduction level permanent, lawmakers have built in a sense of consistency for owners, who can now make sound investment choices with the knowledge that the deductions will be available. This relieves a considerable amount of stress for business owners who need to plan their strategies for the new year by investing in their company.

Not only does the bill include the permanent extension of the higher deduction level, allowing small business owners the ability to purchase more technology and equipment, but the new rule also includes an added depreciation bonus for property acquired between 2015 and 2019. For 2015, 2016 and 2017, owners can deduct 50 percent of the cost of putting the property into service, while this amount dips down to 40 percent in 2018 and 30 percent in 2019. The added deductions should encourage more small business owners to take advantage of the new rule, hopefully making up for much of the confusion caused in previous years.

Benefiting diverse industries

Small businesses form the backbone of the nation’s economy and without the extension of these crucial tax deductions, many enterprises would be unable to find the capital necessary to grow. But with the passage of the new bill, owners will have the opportunity to invest considerable working capital in their businesses.

According to the U.S. Census Department, in 2012, very small businesses, or those with fewer than 20 employees, employed national, or 17.6 percent of the working population, while small businesses, or those 20 to 99 employees, had 19.4 million people working for them, or 16.7 percent of the population. Meanwhile, medium businesses, those classified as having 100 to 499 workers, constitute 14 percent of the population, with 14 percent. Collectively, these enterprises account for just under half of the total work force. In many instances, companies in this range must take advantage of any additional monetary assistance they can find, and in the past the Section 179 deduction has always been a key force in providing this help. Organizations in essentially every industry can deduct the cost of capital expenses, from agriculture organizations to retail shops to financial-sector companies.

As Farm Industry News noted, this extension will help farmers boost revenues in the face of sliding crop prices. For construction companies, the deduction should help account for the rising expense of labor in light of the skilled worker shortage. For retail shops, the new tax rule can assist in the costly transition to EMV point-of-sale terminals. Offices can take advantage of the change to upgrade computers or invest in new data servers. While most small businesses are eligible for this great offer, owners should speak with a tax professional or accountant before making any final decisions.

Leasing or financing equipment

While small business owners can use this tax deduction to take advantage of capital expenses, Section 179 also allows companies to deduct the payments for financing or leasing equipment. In some instances, the IRS lets owners deduct 100 percent of equipment lease payments because this qualifies as an off-balance sheet operating expenses. Going this route means a small business can then speed up depreciation for the equipment, since this can be deducted during the term of the lease rather than the life of the equipment. In addition, most equipment does not qualify as an asset, alleviating the burden of having to pay the IRS’s Alternative Minimum Tax.

Getting a business loan in times of need

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Spreading the word that you’re considering a loan for your business can be met with all kinds of opinions. From general naysayers to cautionary anecdotes, everyone you meet will have a story as to what might happen if you take out a loan to start or expand your business venture.

While it’s true that not every reason is a good reason to go into debt for your business, that doesn’t mean that good reasons don’t exist. If your business is ready to take a leap, but you don’t have the working capital to do so, here are six reasons you might re-consider applying for a small business loan in Sacramento. Chris Wilcox, Managing Partner with Premier Business Lending says “Today’s marketplace is a great opportunity for small business owners to take advantage of expanding credit windows and private investor funds. It is much easier for small business owners to access capital while helping their business expand.”

1. You’re ready to expand your physical location.

Your cubicles are busting at the seams, and your new assistant had to set up shop in the kitchen. Sounds like you’ve outgrown your initial office location. Or maybe you run a restaurant or retail store, and you have more customers in and out than you can fit inside your space.

This is great news! It likely means business is booming, and you’re ready to expand. But just because your business is ready for expansion, doesn’t mean you have the cash on hand to make it happen.

In these cases, you may need a term loan to finance your big move. Whether it’s adding an additional location or picking up and moving, the up-front cost and change in overhead will be significant.

Before you commit, take steps to measure the potential change in revenue that could come from expanding your space. Could you cover your loan costs and still make a profit? Use a revenue forecast along with your existing balance sheet to see how the move would impact your bottom line. And if you’re talking about a second retail location, research the area you want to set up shop to make sure it’s a good fit for your target market.

2. You’re building credit for the future.

If you’re planning to apply for larger-scale financing for your business in the next few years, the case can be made for starting with a smaller, short in order to build your business credit.

Young businesses can often have a hard time qualifying for larger loans if both the business and the owners don’t have a strong credit history to report. Taking out a smaller loan and making regular on-time payments will build your business’s credit for the future.

This tactic may also help you build relationships with a specific lender, giving you a connection to go back to when you’re ready for that bigger loan. Be careful here, though, and don’t take on an early loan you can’t afford. Even one late payment on your smaller loan could make your chances of qualifying for future funding even worse than if you’d never applied for the small loan at all.

3. You need equipment for your business.

Purchasing equipment that can improve your business offering is typically a no brainer for financing. You need certain machinery, IT equipment or other tools to make your product or perform your service, and you need a loan to finance that equipment. Plus, if you take out equipment financing, the equipment itself can often serve as collateral for a loan — similarly to a car loan.

Before you take out an equipment loan, make sure you’re separating the actual needs from the nice-to-haves when it comes to your bottom line. Yes, your employees probably would love a margarita machine. But unless you happen to be running a Mexican Cantina, that particular equipment may not be your business’s best investment.

4. You want to purchase more inventory.

Inventory is one of the biggest expenses for any business. Similar to equipment purchases, you need to keep up with the demand by replenishing your inventory with plentiful and high-quality options. This can prove difficult at times when you need to purchase large amounts of inventory before seeing a return on the investment.

Especially if you have a seasonal business, there are times when you may need to purchase a large amount of inventory without the cash on hand to do so. Slow seasons precede holiday seasons or tourist seasons — necessitating a loan to purchase the inventory before making a profit off it.

In order to measure whether this would be a wise financial move for your business, create a sales projection based on past years’ sales around that same time. Calculate the cost of the debt and compare that number to your total projected sales to determine whether taking an inventory loan is a wise financial move. Keep in mind that sales figures can vary widely from year to year, so be conservative and consider multiple years of sales figures in your projection.

5. You’ve found a business opportunity that outweighs the potential debt.

Every now and then, an opportunity falls into your lap that is just too good to pass up — or so it seems, at least. Maybe you have a chance to order inventory in bulk at a discount, or you found a steal on an expanded retail space. In these instances, determining the return on investment of the opportunity requires weighing the cost of the loan versus the revenue you stand to generate through the available opportunity.

Let’s say for instance, you run a business where you get a commercial contract for $20,000. The trouble is, you don’t have the equipment to complete the job. Purchasing the necessary equipment would cost you about $5,000. If you took out a two-year loan on the equipment, paying a total of $1,000 in interest, your profits would still be $14,000.

If the potential return on investment outweighs the debt, go for it! When you’re weighing the pros and cons, it often helps to perform a revenue forecast to make sure you’re basing your decisions on hard numbers rather than gut instinct.

6. Your business needs fresh talent.

When working at a startup or small business, you wear a lot of hats. But there comes a time when doing the bookkeeping, fundraising, marketing and customer service may start to wear on you — and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model.

Some businesses choose to invest their money in their talent, believing that this is one way to keep their business competitive and innovative. This can be a great move, if there’s a clear connection between the hiring decision and an increase in revenue. But if having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.

Regardless of the exact reason you’re considering a business loan, the point is this: If, when all costs are factored in, taking out the loan is likely to improve your bottom line — go for it. If the connection between financing and a revenue increase is hazy, take a second look at whether taking out a loan is your best choice.

You want to be confident in your ability to pay back a business loan over time and to see your business succeed. Every business decision involves taking a risk. Ultimately, only you can decide whether that risk is worthwhile.

Alternative Lending

How Alternative Business Loans work for today’s Small Business

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Working Capital Loan

Premier Business Lending provides needed capital for small businesses to help them maintain and keep their business growing. Whether it’s for payroll, inventory, supplies or expansion small business funding can get you the capital you need in days. While a traditional bank loan may be more cost effective, almost 85% of small businesses that apply for a bank loan are declined. Traditional lenders put a lot of weight on personal credit and time in business. The alternative lenders that we work with do not. Our lending partners can provide lending decisions in just 24 hours with minimal paperwork.

Working Capital Loan Requirements

To receive a working capital loan requires just 4 months of business bank statements, our one page application, driver’s license, voided check, and copy of your lease or mortgage statement (if you’re a home based business). Our expertise in finding working capital loans for small business owners is due to our strong relationships with the country’s top alternative private lenders and knowing what type of industries they like to work with. We also have our own in house financing division which will carefully review each file and provide the best available options for each business owner. Each has their own minimum thresholds relating to average daily balances, time in business, capital needs, FICO scores, industry, and cash flows. The minimal requirements are:

  • Time in Business at least 12 months
  • Minimum monthly revenues of $25,000
  • Must have a business checking account

Expectations of A Working Capital Loan

When receiving an alternative working capital loan you should be mindful of several things. These are short term business advances ranging between 3 and 12 months. These are primarily for small businesses that cannot get traditional bank funding and therefore deemed higher risk. The cost of capital will be higher. The repayment of these loans is via a daily ACH debit from your bank account, Monday through Friday, or through your credit card processing (again accepting credit cards are not a requirement). The amounts that you can be approved for will be based on your revenues, typically 7% to 20% of gross yearly revenues. Again, these are short term loans for short term business issues such as paying taxes, making payroll, buying inventory, expansion, etc… Most importantly, these working capital loans are a way of getting capital fast. Many small business owners having pressing issues that require fast solutions. Premier Business Lending have fast solutions. You can receive capital in as little as 48 hours after submitting the few documents that are required. These are not for start ups or for buying an existing business. Underwriters are viewing you as a business owner and your experience at running the specific business as a way of determining how much to advance.

Leasing Business Equipment - Basics

The Basics of Leasing Business Equipment

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From computers and heavy machinery to complete offices, it is possible to lease almost anything for your business. Leasing business equipment can provide a lifeline for cash‐strapped businesses in need of the tools of the trade.

The Basics

How to get it: Equipment leasing is basically a business loan in which the lender buys and owns equipment and then “rents” it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business may purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing, lease new equipment, or return it.

Upside: Advantages include getting your hands on needed equipment without paying the costs 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.

Downside: Leasing can be an appropriate for any business at any stage of development. But when it comes to startup businesses, it is likely the owner will be obliged to put his or her personal credit on the line in order to secure the lease.

Leasing business equipment will include a higher price over the long term. The lease also commits you to keep the equipment for a period of time.
Still, the Equipment Leasing and Finance Association estimates that four‐fifths of businesses at least lease some of their equipment ‐‐ a testament to the usefulness of the practice.

How to Choose an Alternative Business Loan

How to Choose an Alternative Business Loan

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If your small business is like most, you operate on a very tight budget and may need additional funds in order to take advantage of an opportunity that helps your business grow. If your business is a startup or doesn’t quite meet the bank’s requirements for a conventional loan, an alternative business loan may be a viable solution for your funding needs.

However, if your credit is good, you have time to apply and wait for a small business loan, the SBA 7(a), can give you better interest rates and longer repayment terms.

If you intend to use your loan to purchase real estate or long-term-use equipment, an SBA commercial loan, in conjunction with an SBA CDC loan can provide you with 90% of the financing required for the project and the lowest interest rates. If you need startup business loans or less than $50,000, microloans or alternative microloans are practical options to consider.
 

Is an Alternative Business Loan Right for You?

Alternative business loans are generally smaller than conventional bank loans, with available amounts starting as low as $2,000 and maximum amounts of up to $500,000. Terms are shorter, ranging from one month up to five years.

Interest rates are higher than conventional loans, with the best interest rates averaging from 6% to 25%, like Premier Business Lending whose rates start at 5.9%. However, some alternative lenders may charge much, much higher rates, since alternative lenders aren’t subject to the same regulations as banks.

The biggest benefit of alternative loans is that lenders are eager to lend to small businesses, even those that haven’t been in business for a long time or that have less-than-perfect credit. Because of this, alternative loans are easier to apply for than conventional loans, with shorter, less paperwork-intensive applications; most are online and can be completed in under an hour.
 

Alternative Business Loans: What Should You Look For?

Before you accept any loan offer, it’s important to read the entire contract and ensure that you understand exactly what interest rates, fees, costs and penalties you can expect and that you know exactly how much the loan costs in total, as well as upfront expenditures and daily or monthly payments.

You want to be ensure that you understand your obligations and repayment responsibilities, and that you have the means to repay the loan in full and on time.

Loan Amounts: The dollar amounts available to you varies from lender to lender, with the smallest alternative loans starting at $2,000, and the largest as high as $500,000, although most offer up to $150,000.

However, the amount that lenders are willing to extend may depend on your business’s health, which they evaluate using several factors, including your cash flow and your business and personal credit history.

Interest Rates: Interest rates are higher than you would expect to pay for a conventional loan, and may be expressed as a flat fee instead of a percentage-based interest rate, which can make it confusing to compare against other loan options.

Loans with terms of less than a year can also make it difficult to see the actual APR. You can find online calculators that can help you convert the fees and rates to an APR, which gives you a consistent number to use for apples-to-apples comparisons.

Be aware that the alternative lenders are not subject to the same regulation as banks and interest rates for some alternative loans may be exorbitant.

Fees: Most loans include an origination fee of up to 5% of your loan, although most average around 3%. Lenders may also charge an underwriting fee or a maintenance fee. Because fees vary from lender to lender, it’s important to read your contract.

If the fees you are quoted differ from the fees in the contract, you want to ensure that the lender updates the contract to reflect the quote they gave you before you accept the loan.

Repayment Terms: Alternative business loans have much shorter terms than conventional loans. Most offer options of less than a year, with the shortest having a term of just a month and the longest with repayment terms up to five years.

The average repayment term is between 12 and 24 months.If you’re small business needs a loan in order to take advantage of a time-sensitive opportunity, or if you don’t quite qualify for a conventional loan and need an influx of funds to help your company grow, an alternative business loan can be worth considering.

The Growing World of Alternative Small Business Lending

The Growing World of Alternative Small Business Lending

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These days there’s nothing traditional about small business financing. You see, the credit crunch of 2008 created a lending gap: Traditional banks want to loan a half-million dollars or more, but most small businesses only need $250,000 or less.

Traditional lenders rarely look twice at a small business any more, and when they do, only 20% of applications pass muster. These are not very encouraging numbers for small business owners who want to take it to the next level sometime this generation.

What’s a small business owner to do? SBA-backed loans are still the most affordable, but they take forever to process, require a back-breaking pile of paperwork, and are only given out to a very select few since the rules are so strict.

Luckily, nature abhors a vacuum. To fill in the gap, the list of alternatives is growing all the time, which is both a good thing and a bad thing, depending on how well you handle a headache-inducing list of options. Lines of credit, term loans, factoring, merchant cash advances, invoice financing—look, it’s great to finally have choices, but it all sounds like synonyms for “out of my league.” So how do you know what’s right for your business? Glad you asked.

Let’s start with online, also known as alternative, lenders. If an established business can show it is growing successfully, an alternative lender will often provide an infusion of capital to keep up the momentum because they believe in the company and its owner. Since you are not dealing with a bank, but a company that is lending its own money, their analyses and criteria are very different from a bank’s.

It’s also faster and easier to get approved than it would be at a traditional bank, though neither the fastest nor the easiest. Their offerings range from term loans to lines of credit, inventory financing to receivables factoring.

If you want something even faster and easier, consider daily debit or merchant cash advances (MCAs). An MCA lender gives the owner a pile of cash in return for a percentage or flat amount of the business’s daily sales. The great part is how quick they are, and they are even less stringent than online lenders that offer more traditional financing options like term loans and lines of credit. The not-so-great part is the extremely high rates you pay for your money. Also, if your income tends to fluctuate month by month, or day to day, this may not be the best option for you.

In the world of small business financing, the more options, the better.