Section 179 Passes House, Goes to Senate

Congress extended Section 179 for 2014 by a vote of 263-155. The bill has been sent to the Senate.

Section 179 of the tax code allows small businesses to expense the first $500,000 on purchases of qualified equipment, until they pass $2 million. Purchases at levels above $2 million will reduce the expensing allowance dollar-for-dollar, until it reaches zero. The bill also is indexed for inflation so that the expensing level, and phase-out level, will continue to increase over time.

This property is generally limited to tangible, depreciable, personal property, which is acquired by purchase for use in the active conduct of a trade or business. Buildings were not eligible for section 179 deductions prior to the passage of the Small Business Jobs Act of 2010; however, qualified real property may be deducted now.

Finally, 179(b) (3) provides that a taxpayer’s § 179 deduction for any taxable year may not exceed the taxpayer’s aggregate income from the active conduct of trade or business by the taxpayer for that year. If, for example, the taxpayer’s net trade or business income from active conduct of trade or business was $72,500 in 2014, then the taxpayer’s 179 deduction cannot exceed $72,500 for 2014. However, the 179 deduction not allowed for any year because of this limitation can be carried over to the next year.

It is not known at this time how soon the Senate will take up the bill, but there does not seem to be much opposition at this time.

U.S. Companies Turning to Non-Bank Lenders for Credit

A notable share of U.S. small businesses and middle-market companies are obtaining credit from non-bank providers. The most troubling news for banks—and possibly for regulators: nine out of 10 companies that borrowed from these alternative lenders say they’ll look to tap non-bank providers for credit again in the future.

Greenwich Associates surveyed approximately 125 companies for its latest Greenwich Market Pulse, U.S. Companies Turning to Non-Bank Lenders For Credit. Of the companies that obtained credit over the past 18 months, one-quarter reported securing funds from non-bank providers. These borrowers seem very satisfied with their experiences. In addition to the fact that 90% of them said they would use non-bank providers for credit again, 60% said the process of obtaining credit is easier through non-banks than it is through traditional banks.

Roughly a third of companies that obtained credit from non-banks said they did so at least in part because their traditional banks refused to lend, a finding that suggests some of the companies being supplied with credit by non-banks are firms that were unable to qualify for loans through traditional banking channels. But the bulk of the companies using non-bank lenders were attracted to these providers by terms, conditions, rates and pricing that simply were more attractive than those offered by traditional banks. Once they engaged with these providers, the companies were impressed with the experience.

“Companies are saying that non-banks have a simpler application process, require less documentation, and deliver much faster credit decisions,” says Greenwich Associates consultant Duncan Banfield.

The implementation of stricter capital reserve requirements and regulations like “know your customer” rules have made the process of applying for and making commercial loans more complicated and cumbersome for both banks and companies alike. To date, companies say that increased documentation requirements have not had much effect on their relationships with their banks. However, Greenwich Associates projects that the burdens associated with these new requirements will eventually have a negative impact on relationships between small/mid-sized companies and their banks.

“Although non-bank finance companies have long been staples of corporate finance, the one thing regulators would not want to see is the demands of new documentation requirements contributing to a migration of loan activity from the highly regulated banking industry to an emerging group of much more lightly regulated, non-bank providers,” says Duncan Banfield.

Greenwich Associates is the leading provider of global market intelligence and advisory services to the financial services industry. We specialize in providing fact based insights and practical recommendations to improve business results.

Is Equipment Leasing The Right Choice For Your Business?

Simply put, equipment leasing is an alternative type of business loan. The leasing company buys and owns your choice of equipment and then basically rents it to you at an agreed upon rate for a specific number of months.


Traditionally, small to medium-sized businesses have utilized the lease option to help them update, upgrade or expand their capabilities. Whether they’re excavators in need of a new enormous piece of equipment or a service business in need of a new phone system, the advantages of leasing often play a major role in their continued growth. Today, however, even large businesses are using the leasing option to fit specific division or department budgeting requirements.

Equipment Leasing

Equipment Leasing for Your Business


To decide if equipment leasing is the right option for you, consider the major advantages. Leasing may be a smart business decision if you:


·       Like to keep your cash on hand. Purchasing new equipment of any type can mean a sizable outlay of cash that may be better invested in inventory, personnel, advertising or other expenses. Leasing lets you conserve capital for when and where you need it most.


·       Want to establish and utilize additional lines of credit. When you purchase any type of equipment with borrowed money, your credit lines with any bank will be reduced. When you lease equipment, you’re basically establishing a new line of credit with your lessor. Your current credit with the bank will still be available for other uses.


·       Would like to avoid down payments and outlays for soft costs. Traditional business loans usually require a large down payment, often as much as 20%. In addition, they do not include such things as freight, installation or employee training. A good lease program will allow you to include these necessary “soft costs” in the total package.


·       Prefer payments that fit your business and budget. When you work with a good lessor, you’ll be able to structure your payments to meet your business needs. You can budget in a standard monthly payment or take advantage of such options as changing seasonal payments.


·       Want the equipment to pay for itself. You wouldn’t be expanding your business or upgrading your capabilities unless it would increase your productivity or provide you with new opportunities and therefore generate more income. With a lease, your new equipment can help you produce the extra funds that will usually cover the monthly cost almost right from the start.


·       Like to cut through the red tape. Working with a reputable lessor is almost always a faster and easier way to gain what you need to expand or improve your business. There are simply far fewer governmental and legal obstacles to address. This is especially true if you wish to extend your commitment beyond the typical 12 to 36 months. A lessor will work with you to ensure your success.


·       Need to protect your company against obsolescence. In today’s world of quickly advancing technology, the equipment you buy today can be outdated in a matter of months. When you lease equipment, you won’t get stuck with something that has little value to you or anyone else. You can arrange at the end of your lease to purchase the equipment for its fair market value (or an agreed upon amount), continue leasing, lease new equipment or return it.


·       Start with what and who you need. Once you’ve determined exactly what you want in equipment, most sellers will refer you to a leasing company with whom they do business. You may also wish to contact a reputable leasing company first to see who they recommend in choosing the right sellers. No matter which route you take, it’s always wise to get at least two quotes on your equipment.


Then, sit down with our leasing specialists and work through the details. Deciding what you want in terms of a lease is every bit as important as what you need in equipment!