What is a 10% Purchase Option Lease?

A 10% Purchase Option Lease, sometimes referred to as a finance lease, is often selected by businesses who want to keep their options open to purchase the leased equipment at the end of the lease. This lease is most appropriate for businesses that aren’t ready to make a purchase decision at the beginning of their lease.

Here are three things to know about a 10% Purchase Option Lease:

1.  The lessee usually may purchase the equipment at the end of the lease at a fixed price equal to 10% of the original price.

2.  The monthly lease payment will be lower than the $1 Purchase Option Lease but may be higher than the Fair Market Value Lease.

3.  Provides additional financial benefits that may include depreciation and interest expense benefits for tax purposes.

Not sure which type is best for your business? Please contact us and we will walk through the options with you.

What is a $1 Purchase Option Lease?

A $1 Purchase Option Lease is one of the two most common leases that businesses use to acquire equipment today. The other is a Fair Market Value Lease . Each type of lease is useful, depending on the type of equipment and the type of anticipated use. A $1 Purchase Option Lease is often used by businesses or schools when they know they will still be using the equipment for an extended period after the end of the lease term.

Here are three things to know about a $1 Purchase Option Lease:

  1. Provides businesses the ability to purchase the equipment for a $1 at the end of the lease term.
  2. Monthly payments are higher than a Fair Market Value lease because the lessee is now financing 100% of the equipment cost.
  3. Provides additional financial benefits that may include depreciation and interest expense benefits for tax purposes.

Not sure which type is best for your business? Please contact us and we will walk through the options with you.

U.S. Manufacturers Looking Homeward

U.S. companies, especially manufacturers, are looking homeward in the face of slowing growth in China and the continued uncertainty in Europe the Wall Street Journal reported this week. What does this mean for U.S. businesses?

For United Rentals Inc., it means that the “world’s largest equipment rental company’ is increasing its spending by nearly a third in 2012 as more of its customers in construction and industrial choose to rent instead of purchasing their own equipment. For Carlisle Companies it means they are opening new plants in the U.S. and moving their tire production back from China.

For Union Pacific it means that the locomotive giant plans to “buy twice as many locomotives this year, spending upward of $400 million.”

United Rentals CFO William Plummer told the WSJ, “It is an environment that feels like it is building momentum. We are coming out of the depth of the recession and are starting to build momentum on the upside.”

U.S. manufacturers’ investing at home is more encouraging news for the U.S. economy.

Should Your Company Be Thinking Like a Startup

If “startups are hothouses for creativity and innovation, while large corporations are too jammed up with bureaucracy” is it time for companies of all sizes to “think like a startup”?

In Emily Heyward’s article for Fast Company this month “How Any Company Can Think Like a Startup,” she takes a look at what startups are doing right that businesses of all sizes can learn from. Heyward finds that:

 

  • Startups are flatter. Heyward believes this is an important trait because in a startup the people at the top are more engaged in the creative process and are “collaborating with us on strategy.” This is important because everyone is “on board that there’s never a question of whether or not the best ideas will move forward.” However, in a larger business, the higher ups generally are not as involved in the creative process and may shoot down ideas that have been closely worked on only to have to start again.
  • Startups have tighter timelines. Startups don’t have time to waste and belabor or second guess decisions. Tight timelines can help move the creative process along and ensure everyone is meeting their targets.
  • Startups value disruption. According to Heyward, the “best ideas, the ones that everyone remembers, are always disruptive.” Heyward argues that businesses can learn a lot by startups by embracing and valuing disruption.

Could your business benefit by acting more like a startup?

Fed Agrees Economy Improving

Yesterday was another good day for the economy with the Federal Reserve announcing that it intends to keep rates low until 2014. The stock market responded by gaining 83 points. CNNMoney.com reported, “Keeping it at historic lows as the Fed has done since 2008, is meant to stimulate spending by lowering interest rates on everything from mortgages to car and student loans.”

In addition to today’s news from the Fed, 2012 has begun with a flourish of economic stories reporting that the economy is picking up. Business Week is reporting that “Manufacturing in the U.S. grew in December at the fastest pace in six months.” A further sign of the economy’s growing momentum came from the Institute for Supply Management (ISM) that reported its factory index rose to 53.9 in December up froom 52.7 in November again beating expectations of economists. Any reading over 50 indicates expansion.

This week Suzanne Sataline reported for American Express Open Forum that most small businesses surveyed by the Manta SMB Wellness Index, a quarterly index of the state of small businesses, responded that 2011 was a successful year for their businesses. Among the findings of the survey that Sataline reported:

Small business owners tend to be optimists. Nearly three-quarters of those surveyed said the small business economy would improve this year. These folks are a determined lot: 62 percent ranked growing their business as their top New Year’s resolution–ahead of improving relationships with their family, working out more and eating healthier.

According to Pamela Springer, president and CEO of Manta:

Small businesses are the lifeblood of the national economy, and while things have been difficult in 2011, we see every day that small business owners are committed and hard-working and don’t take no for an answer.  In fact, our survey shows that 90 percent of small business owners are optimistic about their company’s growth in 2012.

Question is, what gains are you seeing in your business?

What is a Fair Market Value Lease?

A Fair Market Value Lease is one of the most common leases that businesses select in part because of its flexibility. Businesses often select a Fair Market Value lease if the equipment they are acquiring, such as technology equipment, rapidly loses its value once it is placed into operation.

Here are three things to know about a Fair Market Value (FMV) Lease:

  1. Offers the lowest monthly payments. An FMV lease is ideal for businesses that want the lowest possible payments and are unsure if they want to acquire the equipment at the end of the lease.
  2. Provides tax incentives.  Businesses may be able to deduct the monthly lease payments as an operating expense deduction.
  3. Provides the greatest flexibility at lease end. At the end of a FMV lease a business can decide to return the equipment, continue to pay for and use the equipment per your agreement with the lease finance company, purchase the equipment or upgrade it with newer equipment.

If you have any questions regarding the Fair Market Value Lease, please contact us.

Apple Shakes Up Bookshelf with iBook

Apple made news again by unveiling iBooks2, an updated and enhanced version of Its iBook software that brings to life interactive textbooks, and iBooks Author, a new app that “makes it free and simple to create interactive textbooks for the iPad”, and a new iTunes U aimed squarely at higher education. This app integrates with the new iBooks app and more than 100 courses created by universities around the world are available. Notably, iBooks is only available on the iPhone or iPad. According to Joshua Benton of the Nieman Journalism Lab in his article “The day the bookshelf shook: Four lessons for news orgs from today’s Apple iBooks announcements”:

One of the standout new textbooks announced today was E.O. Wilson’s Life on Earth, the Harvard professor’s attempt to rethink the biology textbook. Aside from what wisdom it will bring about the Mesozoic Era, perhaps its most interesting element is that it is being released chapter by chapter. The first two chapters are available for download now; the remaining ones will be available later at an “aggressive” price.

What does this mean for education? As an Apple Financial Services partner we believe that today’s announcement will drive an even greater demand for and use of the iPad in schools. Over the last two years we are leasing in increasing number of iPads to our charter school customers . Forrester agrees with our assessment of the growing demand for iPads in the classroom. In their blog post about today’s announcement, Forrester reports that “the iPad –which now outsells Macs in schools, according to Apple—is capable of much more than what has previously been produced.” Looks like Apple is intent on reinventing how our students learn.

Eight Overlooked Tax Deductions

Each year millions of taxpayers overlook money saving deductions and credits resulting in overpaying their taxes. Here are eight tips so you won’t become one of the statistics.

Section 179 Deduction. If you own a small or midsize business and acquired assets for your business in 2011, you may be eligible to deduct up to $500,000. For more information about this deduction, you can read our recent post “End of Year Tax Tips” as well as the IRS publication “Bonus Depreciation and Increased Section 179 Deduction under the American Recovery and Reinvestment Act”.

Reinvested Dividends. Although this isn’t a deduction or tax credit, according to Kiplinger this is an “important subtraction that can save you a bundle.” If your mutual fund dividends are automatically used to buy extra shares, your tax basis in the fund is increased with each new reinvestment. Kiplinger advises that investors be careful not to forget including the reinvested dividends in your tax basis—failing to do so may result in double taxation of the dividends.

Additional Bonus Depreciation. If you are a business owner, don’t forget you can write off 100%of qualifying new (not used) assets—including most software, vehicles, and equipment in general.

American Opportunity Credit. Do you have a child in college? Then don’t forget to claim the higher education tax credits. Under the credit, taxpayers can get a reduction in their tax bill of up to $2500 per student provided the tax filers have an adjusted gross incomes of less than $80,000 a year (if single) or $160,000 (if they file jointly). An eligible family with two kids in college could get a tax credit of $5,000. Best part about the credit is that it covers all four years of college. In order to get the credit, you will need to fill out IRS form 8863.The tax credit is set to expire at the end of 2012.

Student Loan Interest.  If you are paying back your child’s student loan, and your child is no longer a dependent, your child is eligible to deduct up to $2500 of student loan interest you paid. However, parents can’t claim the interest deduction since they are not liable for the student loan debt.

Medicare Premiums for Self Employed. If you own your own business and are qualified for Medicare, you can deduct the premiums for Medicare Part B and Medicare Part D as well as supplemental Medicare (medigap) policies. According to Kiplinger, “you can’t claim this deduction if you are eligible to be covered under an employer-subsidized health plan offered by your employer.”

Retirement Accounts. Taxpayers have till April 17, 2012 to set up a new IRA or add to an existing IRA and have it count for your 2011 tax return.

Small Business Health Care Tax Credit. Small businesses that pay at least half of your employees’ health insurance premiums may be eligible for a tax credit of up to 35 percent of the premiums paid. You can find more information at the IRS web site.

The Most Annoying Fees of 2011

Verizon backed down one day after announcing it would begin charging customers $2 for making “one-time bill payments online or by phone using a credit card”. The wireless giant backed down in the face of angry customers taking to social media channels to vent their outrage. Verizon’s turnabout was similar to Bank of America’s reversal in the Fall.

However, Verizon and Bank of America weren’t the only companies to announce new fees in 2011. CNN Money took a look at the others in their article “2011: The year of annoying fees.”

Airlines. Spirit Airlines is now charging customers $5 to have airline agents print boarding passes and next month will being charging customers $1 to print boarding passes at kiosks. US Airways has also raised its fees for overweight and oversized luggage on top of the “$25 fee for the first bag checked and $35 for the second.”

Hotels.  Not to be out done by the airlines, hotels also began hiking hidden fees in 2011. Many hotels are now charging Wi-Fi charges between $10 and $20. In addition, an increasing number of hotels are charging $1.50 a night for the safes inside hotel rooms often stated as “safe warranty charge”on the statement. Other hotels have imposed “luggage holding fee” for customers who have their bags held after checking out.

Banks. Although many banks moved away from their plans to hike fees for debit cards after the Bank of America customer revolt, a number of new fees were still passed on to consumers. Citi now has a $20 a month charge for customers that don’t direct deposit their paychecks and “fail to maintain a minimum balance of $15,000 in their combined accounts.” TD Bank now has a $9 per transaction charge for consumers who have more than six transfers in and out of their accounts each month.

What new fees were you hit with in 2011?

2012 Promises Good Deals for Consumers

With the New Year just underway consumers frustrated by rising fuel and food prices may have a silver lining if they are contemplating a “big ticket purchase or trip in the short term” predicts Jack Plunkett, chief executive of market research firm Plunkett Research. According to Plunkett, in Smart Money’s  “5 Deals to Look Forward to in 2012” competition between online retailers and brick and mortar stores will generate more deals for consumers in 2012.

The five deals Smart Money recommends consumers should track are:

  • Consumer electronics. Over the past 12 months TV prices have dropped substantially and that’s not expected to reverse as manufacturers launch the latest in consumer electronics in January and February.
  • Text-message plans. Take a look at your test messaging plan and determine whether you still need it especially in light of applications that let you message for free. Check out Smart Money’s article “How to Save $500 on Your Cellphone This Year” for more cellphone saving ideas.
  • European Travel. US travelers may be able to save money traveling to Europe for the first time in years due in large part to the European debt crisis. Keep an eye on fairs with the Bing.com price predictor.
  • Wine. If you enjoy a nice bottle of wine, 2012 should also usher in better deals on your favorite vino. As the boutique wineries bounce back you can search for good deals on wine at sites such as Invino.com, Lot18.com and Gilt Taste.
  • Interest Rates. All signs still point to low interest rates at least for the first half of the year. You can track interest rates at sites DepositAccounts.com and Bankrate.com.

Once you are ready to shop don’t forget to:

  • Go online to compare prices and complete purchases.
  • Look for special smart phone apps from your favorite retailers for more product deals.
  • Get on your favorite retailers’ e-mail lists for special offers.
  • Follow your favorite brands on Twitter and Facebook pages for even more specials.