Security Shredding and Storage - a shredding industry publication
by David Fournier

You’ve just watched the evening news and learned that the economy is a wreck and banks aren’t lending any money. Bad news sells, and the business of reporting on the bad news in the economy has been really, really good. If you’re one of the many business owners who need to make an equipment purchase to update, expand or improve your operation in 2009 you have to be wondering just how you’re going to capitalize that expense, if at all.

Truth be told (and contrary to what you see on the news) all is not lost. The fact is that for credit worthy customers the likelihood of obtaining financing for equipment purchases is quite high. Money is readily available to you from banks and finance institutions. Your request for financing should be welcomed because, unlike spending for more discretionary items like cars, boats and even houses, your intended purchase has a very distinct advantage. You want to buy what we like to refer to as “Revenue Producing Equipment”. In short: the equipment that you want to buy will make you money. It is an asset whose value extends far beyond its purchase price. That lowers the risk to any lender that you may not be able to repay the loan. It increases the probability that in hard times you will insure that you make your payment, because without that equipment your income suffers. Lending you money to buy equipment for your business simply makes sense.

At the risk of being redundant I want to emphasize that there is plenty of money available for equipment loans. Some banks and lenders (apparently the more newsworthy ones) have chosen to be stingy with the funds that they have at their disposal but my recent experience is that money is flowing. Loans are available with little or sometimes nothing down. But just because the money is available doesn’t insure that your request will be approved. There are a couple of things that you should be prepared to do to help assure that your project will become a reality.

Provide complete information. When filling out a loan application provide as much information as you can. Depending on the size of your request you may be asked to provide tax returns and financial statements. Don’t try to shortcut the system – providing complete information increases the odds of approval in your favor. The more a lender knows about you the more comfortable they will be doing business with you.

Justify your purchase. Be prepared to explain what the equipment you want is, what it does and how it will improve your bottom line. If you can, submit product literature and equipment specifications along with your application. Again; the more information the better.

Don’t get discouraged. If you apply to your local bank and are rejected, don’t give up hope. In the best of times banks tend to look at things from a worst-case scenario: how will they dispose of that equipment if they have to take it back? In difficult times your local bank may choose to limit their lending to collateral that they are comfortable with. You have other options available. Apply to an equipment finance professional – preferably one that is familiar with your industry. A good equipment finance professional will work hard to listen to your reasons for making the purchase and share your enthusiasm for the project.

So now you’ve been approved for your equipment purchase using money that is readily available from lenders (despite what they say on the news). There is one more very crucial step that you have to take: tell your accountant. Your accountant will know how to best treat your new purchase to save you tax liability.

One important thing to note is that the financial recovery package that was approved by Congress this Fall included portions of the RISE (Recycling Investment Saves Energy) Act. This provides recycling businesses with 50% accelerated depreciation in the first year specifically for the purchase of recycling equipment. Full details have not yet been released but the program will be in affect for several years. Being able to write off half of your purchase in the first year can save you thousands of dollars in taxes. We’ll feature more on this in future columns as the details become available.

Remember: there is no shortage of available money for equipment loans. When the news comes on tonight, sit down and read a book.

David Fournier is President of DADE Capital Corp. DADE Capital Corp. has been financing the Salvage, Recycling and Solid Waste Industries for over 20 years, providing financing options and innovative techniques for the purchase of new and used equipment. Visit them on the web at www.dadecapital.com.

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