Start Here October '20

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S T A R T H E R E 2 0 2 0 means the last disbursement of money is the final one. The caveat—payments during the term are higher for the cus- tomer. Conversely, a lease term can come with a "10–20% end of term buyout to own the equipment but comes with a lower monthly payment," explains Jung. However, the customer can decide they do not want the equipment. Therefore, they do not have to pay the buyout. Because leasing offers a lower monthly payment and the opportunity to upgrade to newer technology once the term ends, it's a popular option for shops that leaves customers with a bit more flexibility, according to Carey Kroll, account man- ager at Geneva Capital. Another point to consider is the dif- ference in tax breaks. "A cash purchase, traditional loan, and $1 PO lease all allow the customer to either write off the entire equipment cost in the year it is pur- chased—if they have the income to offset the purchase—or depreciate the equip- ment cost," says Kroll. In a true leasing agreement, all monthly payments are tax-deductible without income clauses. Finally, one of the more critical and apparent differences between financing and leasing is ownership. According to Greg Bourdon, VP of small business solutions at CIT, in financing equipment, the customer technically owns the asset from the point of transaction. He adds that the customer has the "option to buy out their finance contract early at a dis- count." With a lease, the lessor (the party leasing the equipment) owns the asset. DECISIONS, DECISIONS After comparing the two options, it's time to carefully look at each, and deter- mine what's best for your situation and how it will affect your business before you head into the application process. Jung tells businesses to decide what truly matters to them. He poses, "Do they want lower monthly payments or do they want to avoid an end of term buyout? Do they want to own equipment from the beginning of the term, or do they want to avoid liability?" Moreover, often income and cash flow are the two significant factors in decid- ing which route to go, says Kroll, while Bourdon argues that the major factor in determining one over the other is whether the customer expects to keep or replace the equipment once the period ends. He explains, "If the decorator expects to keep 77

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