Financing Automation
Presented By
Mark Johnson
Americorp Financial
Presentation Overview
Market overview
•  Various ways to acquire automation
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Advantages & disadvantages
Program types
•  Tax considerations
•  Obtaining an approval
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How To Acquire Automation
Cash Purchase
•  Bank Financing
•  3rd Party Financing
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Bank Financing Advantages
Low rate
•  Simple terms: Typically 36 – 60 Months
•  Benefits of ownership
•  Typically set up as a simple interest program
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Bank Financing Disadvantages
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Normally requires a down payment
Tough credit approval process – “A” credits only
Slow approval process – Typically 2-5 days
Inflexible payment terms
Restrictive loan covenants – Blanket lien
3rd Party Finance Advantages
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Easier credit approval – Wider credit window
Quicker approval process : Typically 1 – 2 days
No initial cash outlay
Flexible payment terms
Flexible Structures
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$1 Buyout
10%/FMV
True Operating Rental
3rd Party Lease Disadvantages
Higher rate – Typically 1-2%
•  Not simple interest – Fixed term
•  Potential to have credit ran multiple times
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$1 Buyout Lease
Advantages
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Transfer of ownership
Ability to deduct the depreciation
Ability to deduct the interest
Disadvantages
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Non-cancelable contract
Fixed term agreement
Risk of obsolescence
10% PUT/FMV Lease
Advantages
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Lower monthly payment
Option to purchase
Ability to finance the purchase option
Disadvantages
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Fixed term agreement
Lessor retains benefit of ownership
Cannot deduct the depreciation
True Operating Rental
Advantages
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Off balance sheet financing – Meets FASB rules
Payments expensed on income statement as operational
Low monthly payment
Disadvantages
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Lessor retains benefit of ownership
Lessor not obligated to offer a purchase option
Fixed term agreement
Determining Your Best Option
Do you have excess capital?
•  Is the interest rate the most important factor?
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How quickly do you need funding?
Do you need flexible payment options?
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Deferred payments
Ramp up programs
Are you worried about obsolescence?
•  Do you have capital budget constraints?
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Operating program VS. Capital program
Tax Considerations
Lower your taxable income on capital programs
•  Depreciation deduction
•  Interest deduction
Section 179 Deduction
•  Reduced down to $25,000 in 2015
•  May be renewed to $500,000 – Not guaranteed
Credit Package Information
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Financial statements
Business forecasts
Corporate tax returns
Bank references & trade references
Personal guaranty considerations
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Personal tax returns
Credit reports
How To Promote Your Company
Professional presentation
•  Tell your story
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Where have you been?
Where are you going?
How will automation help your business?
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Impact on bottom line
Contribution to future growth
Summary
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Several ways to acquire new products:
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Consider all options carefully
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Cash purchase
Bank financing
3rd party lease financing
Length of term, rate, end of term options
$1buyout, 10% PUT, operating rental
Ask questions & decide based on your situation
Questions?