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.
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:
- 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.
- Provides tax incentives. Businesses may be able to deduct the monthly lease payments as an operating expense deduction.
- 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 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.
Hawaii Technology Academy (HTA), an innovative online technology K-12 charter school, based in Waipahu, Hawaii, has recently received lease financing for desktop computers and laptops for the entire student body from TEQlease Capital.
“In today’s world the Hawaii Technology Academy believes it is crucial for our school to meet the needs of each and every student by working in close partnership with each teacher and each parent to ensure all students have the flexibility they need to learn and succeed at their own pace,” said Jeff Piontek, head of school for HTA. “With the lease financing provided by TEQlease Capital, we are pleased that we can now provide every student in our school with the technology they need as well as equip our faculty to ensure the students are getting an excellent education.”
HTA has built its learning environment outside of the traditional school building to a web-based curriculum that allows students to stay connected to their teachers and classmates. HTA’s entire enrollment of students now has one to one access to laptops they can use for their web-based classrooms, online discussions and email.
You can read the full announcement here.
With just several days left in 2011, many businesses are determining whether to acquire new equipment now or to wait until 2012. Mike Lockwood, president of TEQlease Capital, recommends businesses carefully research equipment financing needs and determine an equipment lease financing strategy before finalizing any equipment acquisitions.
Below are eight tips for businesses to consider to ensure they don’t make any costly financial mistakes on their equipment purchases:
- Do the math and determine whether the Section 179 deduction and bonus depreciation will benefit your business or not. Section 179 depreciation deductions and bonus depreciation are scheduled to be scaled back after this year. Meet with your tax advisor now and determine whether deferring a purchase may have an adverse tax impact.
- Don’t make an equipment acquisition decision based entirely on the availability of tax incentives.
- Understand your credit and organize your financial information before contacting an equipment financing provider. Lease financing appears readily available for equipment acquisitions for the upper tier of creditworthy borrowers, and loan demand for these borrowers is strong. However, expect the equipment financing provider to require more financial information than in previous years. Explain in advance any negative results.
- Describe to the equipment financing provider what this equipment acquisition will do for your business. Provide a projection of cost savings or incremental realizable margins.
- Don’t assume your bank or the equipment manufacturer’s captive finance company will offer the best terms. Compare rates, lease terms, fees and options.
- Consider bundling multiple equipment acquisitions from different vendors under one lease with an independent commercial equipment lessor. Rates tend to be higher for smaller transactions. Bundling generally results in lower rates, and also minimizes processing fees.
- Don’t pay upfront “application” fees to an equipment financing provider. Do due diligence on your financing provider. Use only established providers.
- Ask your equipment vendor for payment terms so you can defer a portion of the equipment cost, and coordinate deposits, progress payments, and performance retention payments.
If you have any questions regarding equipment leasing please let us know.