Small Business Loan Tips
Business equipment is subject to depreciation, which doesn’t mean much on the front end to those who do not do their own business taxes. To those that do the taxes, it means that every chair, every printer, every computer, and every business vehicle, any equipment no matter how larger or small, has to be depreciated over the life it is given by the IRS, with a small portion of its costs deducted on the tax return each year. It is very tedious, and it is very expensive to keep up with. But doing it correctly can have an impact on your chances of getting a commercial loan.
What Makes it Okay
Enter Section 179 that says equipment up to a certain amount can be counted as an expense in the year it is bought. The amount started at $25,000 and over the years has grown to $500,000. The thing is, the government made it a year to year thing, meaning they have to reapprove the increase from $25,000 each year or it will revert back to that amount. This means business owners cannot plan to purchase equipment to expense until the government makes that decision, usually at the end of the year. But, if the deduction can be taken, it has the potential to reduced taxable income, sometimes by quite a lot.
Why this Hurts
Historically, small business owners cannot make any big equipment purchases, if they are relying on Section 179, until the government sets the cap for the year. This makes planning hard, as it is difficult to plan to spend large sums of money in just a few weeks. They either have to take the risk, or try to make it work. In addition, some businesses raise their prices on certain types of equipment, such as farm equipment, at the end of the year after the government set the Section 179 cap, knowing that many business owners were going to be looking to buy quickly in an effort to get the purchases made by the end of the year.
At the end of 2015, the cap was permanently set at $500,000, with wiggle room for inflation. Now, business owners can plan for spending that will fall under this deduction all year long, without worry that the cap will change or that prices will jump at the end of the year. This means they can take advantage of a cash surplus or a great deal as it comes along, knowing it will qualify for Section 179 come tax time.
Biz2Credit is supports small businesses in need of financial guidance. If you need to purchase equipment but need financing to do it, or if you need money for any other business related reason, we can hook you up with the lenders from our extensive network. Biz2Credit can find the financial product that best fits your needs. Visit Biz2Credit.com today to find out more.