Masonry Magazine December 2008 Page. 40
FINANCE
Dealer, manufacturer or seller financing might, in some cases, be more expensive, but the up-front money is usually less. After all, should an equipment buyer default, the seller is in an excellent position to re-sell the repossessed equipment and can accomplish this far more efficiently and at a lower cost than a financial institution.
Acquiring equipment under a lease arrangement also involves certain upfront costs. The first and last lease payments may, for example, be required to enter into the lease. Although, in some cases, it may be possible to enter into a lease arrangement without an upfront payment, generally any advance payments required on a lease are less than a comparable loan down payment.
Particularly important today are interest rates. Although traditional loans are generally harder to obtain, interest rates are historically low. With a loan, the interest rate is the cost of borrowing money and explicitly stated in the loan agreement. With a lease, the implicit finance charge is rarely disclosed. In fact, because of the way a lease is structured, it may be difficult to determine the interest rate. In some cases, a number of equal lease payments are due upfront, plus the monthly payments over the term and a lump-sum payment at the end of the lease. Because the amounts of the lease payment are different, it is more difficult to determine the actual interest rate charged for a lease. But ask!
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CIRCLE 274 ON READER SERVICE CARD
December 2008 www.masoncontractors.org
RP
Feb 211.4 (0.8pc)
July 199.4 (unch)
Sterling Index(1995-100)
INTEREST RATES
Base Rate
More than more
OWNERS OF MASONRY businesses operating as limited liability companies (LLCs), S corporations, or partnerships may be able to utilize a Section 179 deduction, the 50 percent bonus depreciation or other tax breaks on both the business entity's taxes and their personal taxes. It should also be remembered that many states restrict some deductions, so consulting a qualified professional is important.
Overall, however, with prices discounted to move more services or jobs, postponed payments to vendors and/or suppliers, stepped up collection efforts as well as other fourth-quarter "gamesmanship" can contribute to a banner year. But just who is the masonry contractor or business owner trying to impress? Real, long-term savings come from a reduced tax bill. And, the best way to reduce that tax bill, especially in 2008, is year-end equipment acquisitions.
This year, in addition to the benefits of a full year's depreciation with only a month or two or payments, masonry businesses can further lower their actual tax outlays using the soon-to-expire tax breaks created by the rebate tax law passed earlier this year.
Year-end equipment purchases (YEEPs) may be the way to go. Or, perhaps leasing is a more viable strategy. Either way, needed equipment added to the masonry business before the end of the tax year can be rewarding. IMAS
You can contact Mark Battersby at 610-789-2480 or MEBatt12@Earthlink.net.
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