October '21

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they choose not to purchase the equipment at the end of the lease, they can just return it, says Putnam. A capital lease or dollar out option has a 12- to 60-month term but is viewed by the IRS as a conditional sale. "It is a pur- chase," says Putnam, "meaning that from a tax standpoint, you treat it as such, you carry both the asset and liability on your balance sheet and run through standard appreciation." The capital lease also qualifies for a Section 179 deduction, which allows the business to write off 100% of the cost of equipment up to a certain amount. To take advantage of Section 179, Geneva can structure the lease with a purchase upon termination option at the end, such as $1 or another predetermined amount. At the end of the lease term, the equipment must be purchased, or the lease renewed, to take advantage of the deduction. Many compa- nies choose this option when purchasing equipment during the third quarter of the year so they can take advantage of the tax deduction. Ascentium works with equipment manu- facturers to offer online financing options. This works well for customers browsing new equipment at trade shows. The manu- facturer can show them Ascentium's online portal to apply for financing and they can be approved for a $250,000 purchase in two hours. The application and required signature are electronic. For established companies with great credit, alternative financing is a great op- tion because "our rates are competitive, we move faster than a bank and there are no lien requirements," says Colling. For mom and pops with poor credit, this option is more expensive, and it is important to know how the payoffs are calculated. This type of financing is not like a traditional loan; they are full pay- out contracts. A client can't just pay it off early by paying only the principal and no interest. TRYING TO FIGURE OUT WHEN TO INVEST IN NEW EQUIP- MENT? AARON MONTGOMERY SAYS YOU NEED TO BUILD A MARKET FOR IT FIRST: 1 1 4 G R A P H I C S P R O O C T O B E R 2 0 2 1 G R A P H I C S - P R O. C O M

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