by Matt Pridemore, Vice President
- Are your strategic goals being ignored because of capital constraints?
- Have you developed a scalable business that has yet to be scaled?
- Do you have clients ready to give you more business if only you were licensed in more jurisdictions?
If you are anything like the hundreds of agency owners I have talked to in the last 18 months, then the answers to at least one of these questions is likely yes. Whether due to the tightening in the credit markets, the general uncertainty concerning the economy, or the current political environment; it seems as if the entire business community has collectively pushed the pause button.
The good news is that there is sufficient evidence in the ARM industry to suggest that a number of organizations are ready to push play. Unfortunately, the balance sheets of many organizations are not strong enough to support the capital investment necessary to achieve their desired growth and traditional sources of debt financing are still difficult to obtain.
Several of our clients have used innovative lease programs to fund state licensing projects that have immediately allowed them to attract more national clients. The days of leasing as an option only for cars and copy machines are long gone. Whether it is a state licensing project or a collection software implementation there is probably an innovative lease program available for you.
Terry Rozzini, President of Cypress Financial Corporation, has been in the leasing business for more than 30 years and has provided the following information related to the advantages to leasing:
Provides 100% Financing
Leases can include more than just service fees or equipment costs; you may include maintenance contracts, freight, install charges, software, training and other miscellaneous charges.
Offers Tax Advantages
Businesses can usually deduct their monthly lease payment as an operating expense or if a capital lease or EFA is a better choice; Section 179 under the IRS tax code will allow business to accelerate the depreciation of the equipment to write-off the entire equipment cost in the same year as the purchase.
Lease Term to Suit Your Needs
Leasing, which is simply dollars-per-month financing, helps fit a monthly payment into your budget. You can set up 90 day no payment programs, seasonal payment programs and step payment programs to help you get the licensing, software or equipment you need today and pay for it when it is best suited for your exact situation – unlike bank loans.
Fixed Payments
Your monthly lease payments are fixed for the entire term of the lease. You decide the term and structure of the contract in the beginning. Fixed payments make it easier to budget and manage capital dollars for the months or years ahead.
Protection of Future “Borrowing” Capacity
True leases are means of “off balance sheet” financing and are frequently noted only in their footnotes. By not showing as a liability on financials, a lease will not limit future “borrowing” power with the banks. Additionally, rather than tying up your bank line of credit or using operating capital, you will establish an additional source of funds.
Little or No Down Payment
Leases typically only require one or two monthly payments in advance. A traditional bank loan will require a 10% to 30% down payment and is secured by all business and personal assets (often referred to as a “blanket lien”). A lease is only secured with the licensing, software or equipment listed on the contract.
It is widely recognized that collection agencies must invest the time and resource necessary to develop and implement a licensing strategy that not only protects them from state imposed sanctions and possible civil litigation, but also attracts high-volume and high-yield clients. Don’t put off obtaining the state licensing you need right now without looking into the possibility of using an innovative lease to make it happen today.
