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The tax stimulus bill provides real incentives for companies to accelerate large purchases of software and equipment.

However it is way too late to get a new project into this year’s capital budget. So the money must come from somewhere. In the current economic climate companies are loath to drain operating cash reserves and reluctant to utilize existing credit lines. We can help! Selling your customer on the quality and utility of your systems or equipment is only a part of the battle.

The Stimulus Bill can help you close more sales in 2008.

For example if your customer is looking at the total software, equipment and installation as costing 250K. They agree with cost estimates of saving 10K per month in operating costs. R.O.I. the simple view is it takes 25 months just too breakeven and then we have the internal cost of capital and alternative uses of funds to consider.

You can show the customer they actually improve operating cash flow immediately by leasing the system. Using an estimated lease payment of 5K per month as the monthly cost to finance the software and equipment. Use the estimate operational savings of 10K per month. So they are actually improving cash flow by 5K per month each month they lease the system. If they wait until the next year’s budget cycle they have given up 60K in cost savings.

Highlight the positive cash flow impact.

Operational cost savings of 5K per month.
2008 Tax savings of $87,500 generates significant free cash flow.

If they installed the system in September they would make 4 payments of 5K for a total 20K with an estimated cost savings of 40K over the same period for an additional 20K in positive cash flow. In addition to the operational impact they could immediately reduce tax liability by 87.5K creating significant positive cash flow for 2008. From a business stand point it makes no sense to wait until 2009. If the company has exceeded the 800K equipment allowance under section 179 they can still take an additional 50% bonus depreciation on software and equipment in 2008.

It may be easy to see how upgrading your facility makes good sense today, not next year. You can also see how commercial financing can make a project that was just not going to happen suddenly viable.

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WHAT IT MEANS!

The tax stimulus bill impact makes a compelling case for accelerated Equipment and software purchases.

For a company in a 35% tax bracket they may be able write off up to 250K of equipment and software immediately in 2008 for tax saving of $87,500.

Your customer could purchase 100K in software and or equipment.

Make 1 payment for $2,000 in this tax year and write off the entire 100K for a 35K tax reduction.

Bonus Depreciation

HARDWARE: 2008: 60% depreciation on new computer hardware rather than the usual 20% maximum (effectively an additional 40%): Depreciation would be half the usual amount in 2009 - 2113 each of these years (to offset the bonus depreciation in 2008)

SOFTWARE: 2008: 50% additional first year depreciation on software: Depreciation would be half the usual amount in 2009 –2010 each of these years (to offset the bonus depreciation in 2008).

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Falls Church small business equipment leasing Security software leasing

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The new law includes a bonus depreciation provision available for all businesses on new equipment and software placed in service in 2008. Large and small businesses can expense up to 50% of the value of capital goods placed into service this year, while certain small businesses may have the ability to nearly double the amount they immediately write-off during 2008.

Blue Water News

March 2008

Contact Information:

Blue Water Group

Wilmington, NC 28401

Tel 1.919.521.5921

Email. contact@effectiveleasing.com

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