It’s the end of another year and we’re going into the 1st Quarter of a new year. You know what this means, right? It means none of us get any sleep because everybody does their tax planning at the last minute.
Our phones here at TelScreen have been ringing non-stop because our customers want to know the answer to two questions:
- Which EyeRes system should I get this year?
- Should I lease or should I buy?
The first question is easy for us to answer. We know the equipment you have in your practice right now. All we need from you are a few details about your practice, your patients, your goals for the business. When we have that information we’re able to guide you on which EyeRes equipment will best serve you and your patients.
The second question is more complicated. We could try to answer it – because hey, engineers and scientists will analyze anything – but our core competencies are camera and computer programming. So, we decided to bring in the finance experts.
In a recent podcast, we had the pleasure of hosting four guests who know and understand financing options and the tax laws that affect these options.
Tasha Fisher and Michelle Fuchs from Stearns Bank N.A.
Tabitha Renneker and Mindy Lund from Oakmont Capital Services.
In a 2-part episode for Show, Don’t Tell they answered the question “should I lease or should I buy”. The answer wasn’t simple, though. Because every practice is unique, it’s important to understand the pros and cons of both options. And to know that when you understand the basics of each is when you can have a great conversation with your accountant.
Before we even think about the differences between lease and buy, we must first mention Section 179. It allows businesses to deduct qualifying equipment purchases that were made throughout the year.
To give you a little history, the Section 179 Election to Expense Certain Depreciable Business Assets first appeared in Federal tax code in 1958, with a limit of $4,000. In 2017, the limit was set to at least $1,000,000 and was indexed for inflation. The 2021 limit is $1,050,000. For details about the 58 years in between, see pages 5 – 8 of https://sgp.fas.org/crs/misc/RL31852.pdf.
Now you see why Section 179 is top of mind for business accountants and why your accountant wants you to ask “how much do I get to spend?”
Whether you lease or buy outright, the amount you spend can be deducted as a business equipment expense. That’s right – it doesn’t matter if you’re paying cash or if you’re financing because you still get to take advantage of the deduction. So, one way to look at it is … if you finance, you get a tax deduction for equipment you bought with the bank’s money.
The terms equipment finance agreement and lease agreement result in the same thing: monthly payments.
All of our guests admitted they don’t see many requests for equipment leasing anymore. It’s a term that was prevalent years ago and before Section 179 offered such a generous deduction. Because they work with small and medium sized businesses they are seeing more and more people just do equipment finance agreements.
Having said that, the decision is based on knowing that it’s a matter of who owns the equipment. With the lease, the lender/lessor owns the equipment. With the equipment finance agreement, the customer owns the equipment from start to finish, and there’s no balloon at the end of the term.
Balloon? Uh oh, did we just say balloon?
Yes. We did. This is one of many reasons why, if you decide to do a lease agreement, you must fully understand the terms of that lease. There’s going to be a buyout at the end. It could be $1, it could be $101, or it could be a percentage of the purchase price. Make sure you fully understand the contract, because here’s a surprise feature many doctors miss: in many cases, it is not an option for you to return the equipment. This means you are responsible for that dollar amount or that percentage at the end of the contract. Definitely make sure you know exactly what you’re getting into and what will be due at the end of the term.
As with any contract… buyer beware and read the whole thing.
So now you’re asking “I’d like to buy an EyeRes system from TelScreen. Would Oakmont Capital Services or Stearns Bank N.A. finance it for me?”
The short answer is Yes.
Rather than go into detail about how each of these finance experts works, here’s the nitty gritty:
Underwriting decisions can be made within a couple of hours. Documents and final signatures can be taken care of electronically, through email and document sharing/signature software. You can get approved and have access to the funds all in the same day.
Credit scores might or might not matter. Even if you are a few years out of school with some student loan debt, you can still get financing to purchase revenue-generating equipment. Perhaps you’re buying into a practice or doing a cold start. Equipment financing isn’t the only way. Stearns Bank N.A. has a “startup” program, and SBA loans are also available. If you’re looking to start your own practice, everything from the equipment to working capital, inventory, leasehold improvements, and more can be bundled into one loan.
Your practice and situation is unique. You deserve to have the best financing information possible so you can make the right decision for your practice.
Your accountant can advise you about the tax benefits of purchasing equipment. At TelScreen, we will help you to determine which EyeRes system is the best fit for your practice.
Our finance experts Tasha Fisher and Michelle Fuchs from Stearns Bank N.A. and Tabitha Renneker and Mindy Lund from Oakmont Capital Services can help you fund the purchase without tapping your working capital.