How Investing in Software, Equipment and Tech Can Save Money on Your Business Taxes

Save on your Business Taxes by Investing in technology
Save on your Business Taxes by Investing in technology

How Investing in Software, Equipment and Tech Can Save Money on Your Business Taxes

In addition to the purchase of equipment and assets for your business, the purchase of software can be written off on your business taxes. One of the biggest write-offs comes from taking advantage of IRS Section 179. You can write off up to $1,040,000 under IRS Section 179 for equipment, software and tangible personal property with a spending cap of $2,590,000. Anything not covered by IRS Section 179 can be written off under Bonus Depreciation.

Another area for your tax accountant to explore are tax breaks under the CARES Act passed in March of 2020 to help businesses survive during the measures taken to get the pandemic under control.

What Is Section 179 of the Tax Code?

Section 179 of the IRS Tax Code is for small and mid-sized businesses that purchase equipment, which includes software, during the qualifying year. The deduction under Section 179 allows for the full amount paid or financed during the tax year to be taken. To claim this deduction, businesses need to fill out form 4562 Part 1 and attach the form to your standard business tax filing. The deduction is not automatic so ensuring you have the correct forms is vital to getting the tax credit you deserve.

The best part of Section 179 is that other technology you invest in this year qualifies for this deduction including:

  • Machinery and business equipment
  • Business vehicles and fleets
  • Computers
  • Retail software
  • Office furniture and equipment
  • Property
  • Improvements to commercial buildings such as upgraded security alarms, HVAC, roofs, or fire systems
  • Tangible personal property

What is tangible personal property?

Tangible personal property includes personal computers that you take between home and the office but that are used for business, your personal office equipment, and other property that you own personally but is used for business solely. The property also has to last more than one year.

Some specific items that cannot be deducted using Section 179 include:

  • Land
  • Inventory
  • Permanent structures attached to land such as fences, paved parking lots, swimming pools, courtyards, or driveways
  • Property being used outside of the U.S.
  • Intangible property such as patents, trademarks, and copyrights

Another great thing about the Section 179 Tax Deduction is that even used equipment, machinery, furniture, etc., that you purchase that year is considered a new purchase under the code. To make a claim on your 2020 taxes, the equipment or software must be purchased or financed, installed, and be used between January 1, 2020 and December 31, 2020.

Bonus Depreciation

If your purchase exceeds the IRS Section 179 spending cap of $2,590,000, you can still write off the remaining amount under Bonus Depreciation. The amount over the spending cap reduces the Section 179 depreciation amount dollar for dollar. However, the amount of the purchase not covered by Section 179 is still covered under Bonus Depreciation. Consult your tax professional to ensure that any purchase is covered by IRS Section 179 and/or Bonus Depreciation.

Other 2020 Tax Breaks Your Small Business Needs to Know

One of the biggest tax benefits of 2020 for small businesses comes from the CARES Act that was passed in March of 2020. This legislation allows businesses to delay paying the company responsible portion of payroll taxes that would normally be accrued between March 27th, 2020, and December 31st, 2020. The deferment doesn’t even have to be paid back all at once! Two payments are required — half on December 21st, 2021, and the other have one year later the same day. This tax deferment is only for businesses that did not get one of the SBA paycheck protection loans. However, businesses that do qualify will get two years to pay their 2020 payroll taxes.

Also included in the CARES Act for 2020 is an Employee Retention Tax Credit. This deduction allows your business to get a payroll tax credit if you are at least partially shut down by government order due to COVID-19, your quarterly sales revenue has dropped by at least half, and you have 100 or less full time employees. A wage credit up to $10,000 per employee can be claimed to keep paying your employees. If your business employs more than 100 people, the tax credit can be claimed for furloughed employees or employees who have a drastic reduction of hours. This tax credit is also not applicable for businesses that received a paycheck protection loan.

Alternative Motor Vehicle Credit

If you’re investing in a fleet of cars or business vehicles, not only can you use Section 179 deduction, but you may also qualify for the Alternative Motor Vehicle Credit if the vehicles you purchase use an alternative fuel source such as hydrogen fuel-cell technology. Although the credit doesn’t apply to electric or hybrid cars, you might also qualify for the Qualified Electric Vehicle Credit (Form 8834).

Qualified Research Expenses Credit / Increasing Research Activities Credit

Businesses that are tech, medical, or manufacturing related niches are often eligible for the Qualified Research Expenses Credit / Increasing Research Activities Credit. This credit, for small businesses only, is meant to encourage business owners to do their own domestic development and research of new products.

Some of the activities that qualify under this credit include:

  • Developing new products, formulas, or processes
  • Development of protypes and models
  • Applying for patents
  • Certifying
  • New technology development
  • New software development
  • Environmental testing
  • Building new or improving manufacturing facilities
  • Streamlining internal business processes

You’ll need form 6765 and Form 8974 for your 2020 business taxes. Consult your tax professional because many more businesses qualify for this deduction than actually take the deduction.

Summary

Business taxes can be challenging to understand, and with so many deductions and credits available, consulting with a tax professional is always the best option. While our list is inclusive of tax credits related to purchasing business software or new technology, there are many more breaks your company could be taking advantage of. Regardless of your previous tax years, 2020 is a great year to invest in your new software and technology for your business and take advantage of these amazing tax breaks while they are still available.

Recent Posts

Why Financing Your Software Subscription Is a Smart Business Decision

Grow you Business with Software Financing
Grow you Business with Software Financing

Why Financing Your Software Subscription Is a Smart Business Decision

Many businesses have moved to a variety of software to streamline their business processes including HR, billing and invoicing, tax management, and point of sale systems, property management programs, cloud-based programs, ERP, CRMS, and much more.  Many companies pay for the subscriptions upfront along with the costs of implementing the software, which can be considerable. This can impact the working capital and cash flow of the company, particularly for small and medium-sized businesses. Financing can be a way of meeting your software needs while still maintaining cash flow.

Financing for Software Subscriptions

You might not realize you can obtain financing for software your company uses, including software renewals. While you might not necessarily need a loan for your software subscription renewals and payments, financing can help you keep your cash on hand, particularly during economic downturns and give you stability and certainty in your financial position.

Financing business software subscriptions gives the opportunity for your business to choose monthly payments rather than lump sum payments. Yearly subscriptions mean paying more money upfront. Financing addresses this concern by providing the money for expensive software subscriptions and allows businesses to pay for the subscription and renewals in monthly payments.

Using financing to prepay for multi-year subscriptions also locks the software company into the original pricing for the term of your subscription. This means that even if the software company increases their fees and pricing, the price you paid when you choose a multi-year renewal is the price you get for the term of your subscription.

When implementing new software, businesses also have the cost of implementation and the training their employees on how to use the software. The implementation and training can cost more than the actual software, especially when you have many employees that need to learn how to use the software. Financing through a private funding company such as Dimension Funding can provide the funds for training, implementation, hardware, and third-party vendor costs. Bundling these costs along with your annual subscription fees allows you to break down the cost into low monthly payments that are more affordable than fronting all the cash at purchase. This allows small and medium-sized businesses to invest in software they might not otherwise have access to due to financials.

What Else Should Business Owners Consider with Software Financing?

Depending on your business, a traditional bank loan is not always an option for financing. Banks often put a blanket lien on all of the company’s assets as collateral. Financing companies generally are unsecured as they only use the software / hardware as collateral. Banks are also not always keen on offering financing solutions for businesses that haven’t operated very long or small businesses that don’t have a lot of cash flow. Banks also require a lot of paperwork and can take weeks to approve you for a loan. These reasons are why so many small and medium-sized businesses are finding solutions in private funding groups such as Dimension Funding.

Small, privately owned financing companies for businesses make financing your software subscriptions easy to understand. There are often no lengthy financial records needed, and good credit can get businesses fast approval in less than 24 hours. Many of these financing companies, like Dimension, offer online applications and DocuSign so you don’t have to print out the paperwork and scan it back. Businesses also have a unique opportunity to be able to finance their business hardware and professional services alongside their subscriptions with many of the private financing companies.

Business owners should consider upgrading their hardware, such as servers, computers, printers, and office equipment through private financing companies. An investment in your business technology can streamline your processes and leave your clients satisfied. Professional services, implementation and training costs related to new software and hardware, as well as the delivery and maintenance of the new technology can also be financed and bundled with the software subscription.

Why Choose Private Funding?

If you’re trying to take your business to the next level and invest in technology and you haven’t been in business for long, you’re generally going to get told “no” by banks. Traditional bank loans can be difficult for many small to medium-sized businesses to get. Private funding offers more flexible term options, less paperwork, and financiers who understand your business needs.

Private funding companies like Dimensions also work as financing partners for vendors and can offer working capital loans that can improve your cash flow management. Private funding companies offer business financing solutions that work for owners to improve and expand their business. Dimension Funding and other private funding companies can also help with equipment needs, with everything from computers to furniture to fleets and construction equipment and tools. Funding companies don’t just offer loans; they offer business solutions tailored to your business needs.

If you are interested in discussing funding and financing for your company, contact Dimension Funding at 800-755-0585.

Recent Posts

Why Financing your Business Equipment is your Best Move

Financing Equipment Benefits
Financing Equipment Benefits

Why Financing your Business Equipment is your Best Move

Business owners know that the tools and equipment they need to run efficiently can be one of the costliest expenses. Many business owners are already strapped when it comes to loan options because of their start-up loans or not having enough business capital or cash flow to qualify for traditional loans. This lack of funding options can often lead business owners to put off upgrades in their technology and equipment that would otherwise increase productivity and efficiency thus raising profits. Did you know that your options as a business owner are not limited to lines of credit through a bank? Owners need to consider the ways that equipment financing can benefit them when funded through private funding companies.

Benefits of Financing Equipment

Businesses need to be able to purchase equipment, upgrade their technology & software as new advances come out, and the need for other equipment arises. For businesses to remain competitive they need the tools to do so. However, some equipment such as specialized tools, construction equipment, medical equipment & technology, vehicles fleets, and computer technology can cost companies hundreds of thousands of dollars in upfront costs. If you are a small business owner, it is unlikely that you have this kind of cash on-hand or if you do, want to reduce your working capital, particularly during a recession.

You experience an increase in your working capital when you can free up part of your budget through equipment financing. You don’t have to worry about cashflow shortages after paying an exorbitant amount of money upfront for equipment purchases. Use your working capital for operating expenses and growing your business rather than financing your equipment purchases.

Bank Financing vs Financing Company

Electronic FinancingOne benefit that comes with equipment financing over bank financing the bank requires a “Blanket Lien” meaning that all of assets of the company are security for the financed equipment. With a financing company, the financing is unsecured with only the equipment as security.

Banks rarely cover soft costs such as transporting, installation and maintenance of equipment. Those expenses must be paid upfront. With a financing company, those soft costs can be included in the financing.

Banks often require a 20% down payment. Financing companies finance the entire amount including soft costs.

Banks prefer to loan money on a floating or variable rate tied to the Prime Rate. Financing offers a fixed monthly payment. If you finance your equipment purchase, you know exactly what you are going to pay, the monthly payment and for how long.

Financing Turns a Large Upfront Expense into a Monthly Payment

Along with freeing up working capital, another monetary benefit of equipment financing is being able to break the cost of the equipment down into smaller, more manageable fixed, monthly payments for a term up to the life of the equipment. You can treat your equipment loan just as you would any of your other monthly operating bills or invoices and cash in on the tax benefits!

Tax Benefits

Save Working CapitalThe tax benefits of financing your equipment purchases should also be something business owners take into consideration when deciding on financing equipment. When you make financing payments, you are paying on the interest in addition to the amount applied towards the purchase price of the equipment. The interest payment portion of your loan is tax deductible each year that you are paying on the loan.

Also, under IRS Section 179 you can write off the entire equipment purchase up to $1,040,000. Under IRS Section 179 there is a spending cap of $2,590,000. However, Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. If you finance the equipment purchase, you can write off the entire purchase in the year that your purchased / put the equipment into service but make payments for the term of the financing agreement (often over the life of the equipment).

How to Get Equipment Financing

Equipment financing is usually obtainable through private lenders that supply capital to businesses, entrepreneurs, and owner-operators. These lenders specialize in commercial financing and lease financing for any type of business equipment you might need. Some of these companies, such as Dimension Funding, finance 100% of the costs associated with new equipment purchases including the shipping, installation, and maintenance of the equipment. Business owners can also include training expenses in their funding requests to offset the payroll expense of training employees on how to effectively use the new equipment.

BulldozerApplying for these loans are easy and simple. You can apply for up to $250k without providing financial statements and if you need more than that, the paperwork process is streamlined for your convenience. When you apply online through Dimension Funding, you can get an answer in as little as a few hours!

What Types of Equipment Can Be Financed?

Equipment Financing Up to $250k without Financial StatementsJust because your business does not use heavy equipment like cranes or expensive tools, doesn’t mean that what you need to run your business isn’t qualified for equipment financing. There are many industries that benefit from this type of funding including:

  • Breweries
  • Construction & heavy equipment companies
  • IT/Technology based companies
  • WISPs & Internet Service Providers
  • Law Firms
  • Health Services
  • Medical Supply
  • Restaurants
  • Manufacturing
  • Industrial

Also included in your equipment financing can be the funds to deliver and install the equipment, provide long-term maintenance, and training your employees on how to use the new equipment—including software! At Dimension Funding even software programs that your company needs to operate such as payroll and accounting software, POS software, and more can all be financed just like your heavy equipment and technology.

The best way to figure out if your business and equipment needs are eligible for financing is to start the application process with Dimension Funding. One step financing approval is available to get you the answers you need right away.

Recent Posts

Tax Breaks Your Business Needs to Take Advantage of Before the July 15th Deadline

Tax Benefits for Small & Medium-Sized Businesses
Tax Benefits for Small & Medium-Sized Businesses

Tax Breaks Your Business Needs to Take Advantage of Before the July 15th Deadline

The July 15th tax extension deadline is fast approaching. If you’re scrambling to get everything together for the filing deadline, you might overlook some of the most significant tax breaks possible for 2019. You might have an accountant or bookkeeper doing your small business taxes for you. However, you should still make sure they are following up on these fantastic 2019 tax breaks for small and medium businesses to make sure you get the most optimal tax filing possible.
  1. Rental Income: Do you have investments in properties that you rent? Many landlords don’t realize that in the fall of 2019 the IRS decided that rental properties qualify for the 20% deduction the IRS allows as qualified business income. Rental properties can now be treated like businesses for the Section 199A tax deduction!
  2. First-Year Depreciation on Property: Did you purchase property you are using for business purposes? A new office? A brick and mortar location? These investments can be claimed for a depreciation bonus in the first year of owning the property equal to 100% of the property price. A recent update to the Tax Cuts and Jobs Act, TCJA, has extended this tax credit through 2027 for any properties purchased. This tax cut can also be used on equipment, software, machinery, and more that you use for business. You can learn more about this specific deduction further down.

  3. Research and Development Tax Credits: Did you know that the Wall Street Journal reported that 95% of ELIGIBLE small to mid-sized businesses do not take advantage of the R&D credits they are entitled to?  R&D credits are available to many more companies than you might think.  Any company that designs, develops or improves products, processes, techniques, formulas, inventions or software may be eligible. In fact, if a company has invested time, money and resources toward the advancement and improvement of its products or processes, it may qualify. Identifying and claiming R&D credits is a process that not every CPA does, but there are companies that don’t compete with tax-preparers and specialize in making it simple and risk-free for small to mid-sized businesses to reclaim past credits and take advantage of future credits that are due.  There are billions of dollars available – You just have to have a company that knows how to document the credits…and then apply.

  4. Green Vehicles: Did you invest in a green vehicle, or maybe even an entire fleet for your business? There are tax credits available up to $7,500 for new electric vehicles that your business purchases, although there are qualifications based on size and battery capacity.
  5. Employee Healthcare: If your business has less than 25 employees working full time and you are providing health insurance for them, you may qualify for a small business tax break for healthcare up to 50% of your cost of coverage. To be eligible, business owners need to be paying half of the monthly premium under the Small Business Health Options Program.  There are employee qualifications as well, such as making less than $50,000 per year per employee on average, and each employee must be working 120 days of the year, at least. The smaller your business, the bigger your tax credit, so make sure your accountant looks into the healthcare credit even if you only have a handful of employees. If your employees have HSAs already, the amount eligible for them to put into their Health Savings Accounts has been increased to $7,000 for families and $3,500 for individuals. These tax-exempt savings also lower your FICA contributions.
  6. Pension Plans and 401k: Your employees have an excellent benefit for 2019 & 2020—The IRS raised the limit for employee contributions to retirement plans by $500. If you are over 50, the limit was increased to $6,500! This increase means your company’s FICA contributions should be lowered. There is also a Credit for Small Employer Pension Plan Startup Costs, so if you have never offered a pension plan to your employees, and you have less than 100 employees, now is the time! Up to $500 per year for the next three years can be credited back to you for your pension start-up costs.
  7. Start-Up Costs: The Federal Government offers new businesses a tax credit up to $5,000 for start-up costs. The qualified expenses for start-up costs can include advertising, traveling, purchases of equipment, time to investigate the market and write your business plan, and more!
  8. Self-Improvement: Yes, you can get a small business tax credit all for bettering yourself. The costs associated with continuing education to maintain a license or certificate, professional development, and more are all business expenses that can be deducted.
  9. Travel and Lodging: Another business expense that some business owners don’t realize they can deduct is the cost of their travel and lodging. Mileage deductions, car loan payments, the cost of conference tickets, meals, and cab rides can all be deducted when you are traveling on business. Even your car rental, airline tickets, hotel stays, and even entertainment can be claimed. Make sure to keep your receipts and a travel log detailing what business you were in town for and who you met.
  10. Home Office: Do you run your business from home or have a home-office specifically used for business? The IRS allows sole proprietors to deduce some of the cost of their home office. The simple deduction allows for a maximum deduction of $1,500 for offices that are smaller than 300 square feet, or $5 per square foot, whichever is less.
  11. Employed People Working from Home. One downside of the Tax Cuts and Job Acts was that it eliminated the federal tax deductions for employed people working from home who have home offices.
    There are seven state—Alabama, Arkansas, California, Hawaii, Minnesota, New York, and Pennsylvania, however, that chose to still allow this deduction for their state income taxes. Tax payers in these states who are not self-employed but still work from home are eligible to claim non employer reimbursed expenses such as computers, desks, and chairs for their home offices.

IRS Section 179 Tax Benefits

The one tax break listed above that we see accountants, bookkeepers, business owners, and even tax professionals sometimes miss out on is the tax credit for depreciation of new property. IRS Section 179 allows businesses to deduct up to one million dollars of the purchase price of new property such as equipment, machinery, and software for their business as long as they don’t purchase more than $2.5 million in total. Anything over $2,500,000 can be taken as “Bonus Depreciation.” This deduction applies to purchases that are financed as well. Even if you don’t pay for your equipment, software, or machinery up front, you can still deduct the entire agreed-upon purchase price the first year. The savings go beyond a simple tax credit, however. The amount you save in your small business tax break under Section 179 could equal more than you pay on the property in that first year. Many small and medium-sized business owners find themselves coming out ahead when they take advantage of this specific tax credit.

Tax Tips for Small and Medium Businesses

Whether you have owned your business for decades, or just started up this year, there are a few tax tips that you should review in addition to the deductions listed above. The most important piece of advice is to hire a tax professional to handle your business taxes. These professionals are up-to-date on the latest tax laws, deductions, and credits that could apply to your small business and should make sure you that take advantage of everything the federal government offers. However, since you are the one ultimately responsible for your taxes, you should ensure:
  • It would be best if you kept your taxes in mind all year round by keeping receipts, travel logs, and getting financial statements from your CPA or bookkeepers.
  • Don’t make assumptions about what tax breaks you may or may not qualify for. Hiring a tax professional is the best way to ensure you get the best outcome for your tax situation.
  • Expect to pay taxes. Before you owned a business, you might have been looking forward to your refund check every year. Businesses should always expect to owe and need to pay into taxes. One thing you can do to be prepared is to set aside at least 10% of your monthly profits into a savings account that you can use to pay your taxes when they come due.
  • Depreciation is based on the purchase price, not the amount paid. Even if you have only paid $1,000 towards your loan on software purchased last year, the deduction in appreciation you qualify for is based on the whole amount you have financed.
Don’t miss out on any of the valuable tax credits your small business could be taking advantage of this year. Contact your CPA or review your taxes if you haven’t already and ask them to make sure you are getting the most out of your tax preparation and the best outcome for your business before the July 15th filing dates

Recent Posts

The Types of Financing Your Wireless Business Needs to Grow

Types of Financing for Wireless Providers
Types of Financing for Wireless Providers

The Types of Financing Your Wireless Business Needs to Grow

Small and mid-sized wireless providers face a new challenge. The current coronavirus, COVID-19, a pandemic that is sweeping the world, has shown businesses and educators that there is another way to conduct business and school—online at home! As schools are scrambling to meet the needs of students that lack internet access, employees are desperate to find a reliable wireless provider that meets their needs. Rural communities and communities with a lack of options are finding the transition into a more digital world difficult and frustrating.

Wireless provider companies have an excellent opportunity to rise to the occasion by expanding their networks and subscriber areas into new communities and increasing their Wi-Fi capabilities with faster download and upload speeds, more bandwidth, and better reliability. The problem that these wireless providers face is the ability to pay for all the upgrades and expansion. Without an upfront increase in subscribers, how can a company gain capital for growth?

There are four types of telecommunication companies that are addressing internet needs. Broadband internet is the method of delivery used by these companies and is the industry standard for high-quality, reliable internet. Cable, WISPs, FISPs, and Hybrid companies will each have different financing needs and methods for obtaining that financing. We’ll break it all down for you below so you can decide which methods apply to your internet company.

Cable Telecommunications Companies Financing

Cable operators should be looking to the future and how they can implement new wireless solutions to their traditionally wired models. Many wired providers are focusing their 2020 expansion efforts on becoming a hybrid solution that can offer both wired and wireless internet options for residential and commercial customers.

One of the ways cable operators are entering the hybrid space is by expanding their infrastructure to get more cable fiber laid throughout communities. Expanding your infrastructure is a costly expenditure, and many small to medium-sized cable operators don’t have the capital to expand without the customers already locked in. Luckily, banks are beginning to understand the financing needs of internet providers. However, there is still a long way to go in trying to reconcile asset-backed collateral with the projections of financial growth and the ability to repay when the monthly cash flow may not be reflected yet.

WISPs Challenges in Finding Financing

Wireless internet services also provide broadband internet access and are one of the fastest-growing, albeit newest, forms of internet provider services. The return on investment for WISP company owners is much higher than the other competitor companies. WISP companies are generally aimed at increasing their subscriber base through expanding their infrastructure.

WISPs need financing to expand their infrastructure throughout neighborhoods by adding fiber to connect more broadband pipes to towers. In-home technology also needs to be top-of-the-line and high quality if WISP companies want to be competitive. More towers and antennas are needed and are some of the most expensive technology to build and operate.

WISPs have one of the most challenging times obtaining financing through traditional banks because of the lack of collateral these businesses have. Many bankers do not want to take the risk in lending to WISPs based on growing subscriber bases that could fluctuate at any time.

FISPs Financing

Fiber Internet Services Providers are very similar to WISPs because they use fiber to transfer the internet. Fiber is the most reliable and considered the optimal way to deliver internet access. Most WISPs that use fiber are often considered to be hybrid because they can offer wired connections through fiber as well. FISPs and Cable operators are the most trusted internet service providers currently on the market and generally have much better success in obtaining traditional financing.

Hybrid Internet Service Providers

One of the ways that internet providers are finding is the fastest, easiest, and most profitable way to expand and grow is to become a hybrid internet service provider. As cable operators begin to offer wireless solutions and WISPs begin to expand by laying more fiber and broadband pipes, these companies become hybrids.

Fiber is costly to deploy because of how labor-intensive the process is concerning wireless solutions that rely on tower signals and in-home equipment. Because fiber is the most reliable, internet providers need to begin using fiber in their operations. Many hybrid companies use fiber in their towers, however, and don’t always run fiber straight into consumer homes.

5G and Wireless Expansion

One thing that all internet service providers need to invest in is the 5G technology the world is seeing spearheaded by the United States. This new technology is expected to be the leading mobile network technology by 2025, and home internet companies need to get on board as 5G changes the landscape of wireless access.

Financing Solutions for WISPs, FISPs & Other ISPs

When banks fail to understand the financing needs of WISPs and other service providers, these companies may also face a stall in their expansion and growth efforts. One way to get the financing these providers need is to go through capital investment funding. These sources of funding are great for small and medium businesses, entrepreneurs, and operators that need financing for equipment, software, IT equipment, commercial trucks and trailers, and more.

Working capital loans are also an excellent solution for small and medium telecommunication companies that need extra cash flow for things such as payroll and business expenses. Repayment terms are often flexible, including monthly, weekly, or even daily payment options with low-interest rates and easy to understand terms.

Private funding groups often look at more than just collateral when they are determining the loan you qualify for and focus on annual revenue and bank statements showing the cash flow of the business. Working capital loans through private funding companies will also be different than the loans offered for equipment or software financing specifically.

When companies need specific financing for ventures such as new equipment and material to expand their infrastructure, the terms and conditions can be different than a loan that is for any business expense. Some of the differences can include interest rate and term length.

If you’re more interested in learning about financing for your internet company, contact Dimension Funding to get started on your approval process. 

Recent Posts

Implementing Electronic Medical Records (“EMR”) Software for Small Healthcare Organizations

EMR & EHR Implementation
EMR & EHR Implementation

Implementing Electronic Medical Records (“EMR”) Software for Small Healthcare Organizations

In order to comply with the HIMSS EMRAM, many hospitals are adopting EMRs in order to move their organization closer to achieving a paperless environment and improve the quality of patient care. Many doctor’s offices, clinics, and managed care facilities are going to EMRs or EHRs because of the convenience of going to paperless recordkeeping.

Also, many healthcare facilities are trying to improve the patient satisfaction levels and having an EHR or EMR is a big part of their solution. By allowing hospitalized patients to review their charts, order their dinner, access the internet or watch TV via electronic means, it improves the overall patient experience, particularly for extended hospital stays.

Adopting electronic medical records comes with its own set of problems. It can take months or even years to fully incorporate or update an EMR system depending upon the size of your organization and the level of HIMSS compliance that you wish to attain. It can also come with a large price tag.

Implementation is An Expensive Process

A major issue with EMR software is how expensive it can be. Implementing a full system for an EMR can cost over $150,000 for just one physician. The total cost, of course, grows much more expensive the larger the medical facility and the more advanced the software and hardware.

Because of this, it’s important for any medical facility looking to implement an EMR system to consider the high cost into their budget. Not only is the upfront cost of implementing such a system high, but it needs to be maintained and occasionally updated to keep in line with the latest regulations.

So, it’s imperative that these costs be taken into consideration when managing an EMR system for any medical organization, whether it be a large hospital or a small physician’s office.

Required Training

Another important thing to keep in mind with any EMR system is the training that is required to use them. This training includes medical personnel & doctors as well as staff. It can involve a whole new system of doing things within the healthcare organization when they move from paper to computerized records. It can take many months and sometimes years in order to completely implement an EMR system.

This creates yet another cost that must be factored in when considering the budget for the EMR system as well as a hurdle that needs to be overcome before the system can even be used in the first place.

Cutting Edge Software and Hardware

When moving from paper medical records to electronic records, most healthcare organizations will need new hardware, security and IT personnel. This can be a large investment. The computers will need to have the capacity to run the EMR software and any patient satisfaction software. You’ll want computers that are able to do double-duty: be used by the doctors and staff to enter information and, for patients who have overnight stays, a patient engagement platform so that they have a good experience with the hospital or healthcare facility.

Additionally, for many healthcare organizations, it’s likely that it will need tablet PCs with scanners in order to scan prescriptions, patient wrist bracelets, and implement other patient tracking requirements.

There are also security concerns with electronic records including HIPAA requirements that means investing in security technology and IT personnel.

All this adds up to a substantial investment in new hardware and personnel.

Options for Small to Medium-Sized Facilities

Many smaller healthcare organizations can’t afford the substantial upfront costs of implementing an EMR system. The solution to this is to finance the upfront costs and the subscription itself. This allows the organization to pay for the EMR and its implementation in monthly payments over an extended timeframe which is much more manageable.

However, the decision to finance an EMR needs considerable attention as there are a lot of factors involved, including deciding on a finance company, determining how money needs to be financed, and factoring in the monthly payment along with all the other monthly costs that the organization must budget.

Fortunately there are companies with specific expertise in the financing of EMR/EHR solutions that can work directly with busy practices to help them create a financing program that meets their objectives and enables a simple, easy and efficient solution that enables all of the various costs of engagement to be aggregated together with one monthly payment over a term that meets budgeting requirements.

One of the primary goals of the practice when considering the EMR/EHR acquisition is the ability to conserve their working capital and not disturb existing banking lines of credit. For that reason, many healthcare professionals have relied on financing programs and have found that results in the most economically feasible approach for moving forward.

Further, there might well be Section 179 tax benefits available when selecting to finance this important technology.

Recent Posts

FOUR WAYS THE TCJA CAN SAVE YOU MONEY ON BUSINESS SOFTWARE

Save money on your taxes with the TCJA

FOUR WAYS THE TCJA CAN SAVE YOU MONEY ON BUSINESS SOFTWARE

Save money on your taxes with the TCJA

By now you’ve probably heard about the Tax Cuts and Jobs Act, President Trump’s major corporate tax bill. Known commonly as the TCJA, this law has already had far-reaching effects around the nation. But nowhere has its impact been felt more strongly than in the business sector. In fact, many industries will experience double-digit reductions in their tax liabilities under this new law (source: Ernst & Young).

If you’re wondering how the TCJA can help serve your company’s bottom line, you might find that major savings can come from an unexpected place—software that you buy and use to run your business. The TCJA has expanded companies’ ability to deduct the costs of buying, renting, and financing software more than ever before.

For more details about how much you can claim in deductions for business equipment and software, see the [first article in our series.] For now, here are four steps you can use to take advantage of software deductions for your business:

  1. Find out which software is eligible for deductions. The first thing you’ll want to do is learn exactly which types of software do and do not qualify for deductions under the TCJA. There is a specific list of parameters set forward by the IRS that determine eligibility.
    • The software has to be used by your business for the purpose of producing revenue, either directly or indirectly.
    • The software must have a lifespan of ‘usefulness’ that can be clearly determined (This essentially means that the effectiveness of the software for your business must be clear.)
    • The software must be expected to be functional for at least one year or more.
    • The software can’t be totally custom to your business—it must be available to the general public at large for purchase and not heavily modified for your company’s use.
    • The software can’t be purchased on an exclusive license. That means it’s not only your software, but can be used by others with their own licenses.
      This might seem like a lot of strict parameters, but the good news is that most software qualifies under all of these stipulations. As long as software is available to the public and used by your business for a clear income-generating purpose, you’ll generally qualify for the deduction.
  2. Learn how section 179 works and what it means. We discussed Section 179 in the [first post of this series]. It’s the section of IRS tax code that applies specifically to which equipment and software purchases can be deducted and for how much.
    Under the Tax Cuts and Jobs Act, the deduction limit for 2019 has increased to $1,000,000 with a spending cap on equipment purchases set at $2,500,000. You can also temporarily deduct 100% of depreciation costs for 2019, though this number will decrease in the coming years.
  3. Consider financing your software purchases. The TCJA’s new rules allow businesses to deduct the full cost of equipment and software purchases made by a business in the year those purchases are made. Amazingly, that also applies to financed purchases.
    What does that mean for you and your business? It means that financing software can actually increase your cash for the fiscal year. If you were to finance $100,000 in software in 2019, but only make $5,000 in payments over the course of the year, you’d still be able to claim a deduction of $100,000, resulting in savings of tens of thousands of dollars.
  4. Ensure your software purchases qualify. If you’re planning on taking advantage of the tax benefits of financing software for 2019, it’s important to make sure your purchases qualify. The IRS treats software much in the same way it treats all business equipment purchases. That means that to qualify, the software must be purchased and put into use in the same year that it’s being claimed.
    The software must also be genuinely new to your company, and it can’t have been bought from an entity that has any direct connection to your own.
    Software is an essential aspect of nearly every modern business and industry. And now, thanks to the Tax Cuts and Jobs Act, buying or financing computer software is a smart financial move in its own right. If your business is in need of vital software, there’s never been a better time.

If you’d like to learn more about financing software for your business, contact Dimension Funding today.

Recent Posts

Four Steps to Maximize Working Capital Deductions Under the TCJA

Maximize Working Capital Deductions Under the TCJA

Four Steps to Maximize Working Capital Deductions Under the TCJA

Maximize Working Capital Deductions Under the TCJA

As you know, working capital is what’s left of your business funds after factoring in income and costs through the fiscal year—and it can determine whether your business struggles or thrives. That’s why many companies turn to short-term working capital loans when they temporarily need to extend their working capital.

But many businesses fail to take advantage of major tax deductions when it comes to the short-term working capital loans they receive. Why? Because they don’t know that recent bills like the Tax Cuts and Jobs Act (TCJA) make it easier than ever to claim deductions on these loans. That makes short-term working capital loans more financially viable and accessible than ever.

Let’s look at four ways you can take advantage of deductions on your working capital business loan:

  1. Recognize what qualifies as working capital. The good news is that interest paid on nearly any type of business debt can be deducted under the Tax Cuts and Jobs Act and other tax laws. That includes short-term bank loans, other bank loans, lines of credit, real estate mortgages, credit cards or even car loans used for business purposes. Even a personal loan that’s used to cover business expenses can be tax deductible. That also goes for business loans where personal property is used as collateral.
    You must be the party legally responsible for the repayment of that debt for it to qualify. You’ll also need paperwork showing the debt transaction—a UCC-1 statement provided by your bank or creditor is the most effective. Similarly, you must be able to show the IRS that you and your creditor are taking steps to repay the debt. This includes proof of payments and proof of those deposits provided by the lender.
  2. Understand which parts of debt you can deduct. It’s important to remember that only interest on your business debts can be claimed. The principal repayment value of the loan can’t be deducted, since this isn’t considered income earned by your business.
    You also can’t claim a deduction on loan interest until the borrowed money has been put to use. That means it must be spent for a purpose relating to your business, not just kept in the bank. Loaned monies deposited into a bank are considered an investment and thus aren’t eligible for loan interest deductions. They may be eligible for deduction as an investment expense—but you should talk to an expert to see if you qualify under those IRS regulations.
  3. Accurately deduct loans used for personal and business use. Many businesses don’t realize that even interest on personal loans can be deducted as long as some portion of that loan was used for business purposes. You’ll simply need to determine and clearly show which portion of the loan was used for business expenses, and then only deduct that percentage of interest in your tax filing. The same applies for business-centered loans that are partially used for personal reasons.
    For example, let’s say you took out a working capital loan and used it to purchase some equipment. Let’s also say that you use that equipment for personal use around 15% of the time. You’ll be able to deduct 85% of the interest on that purchase, since that’s the amount used for business reasons.
  4. Avoid non-deductible loan expenses. Certain types of debt aren’t eligible for tax deductible interest. These include interest on large loans made off of life insurance policies for employees or owners, as well as interest on loans used to pay taxes or penalties that are owed or overdo. (C-corps are exempt from this rule, as they can claim deductions on tax debt loans.)

If you can learn the best ways to take advantage of business loan payment deductions through tax laws like the TCJA, you’ll be able to save money for your business and ensure that working capital is always available to get you where you’re going. These four steps will put you on the right track to increasing your deductions and decreasing your liability this tax season.

If you’d like to learn more about financing software for your business, contact Dimension Funding today.

Recent Posts

FIVE STEPS TO SAVE THOUSANDS ON EQUIPMENT WITH THE TCJA

Save money with the TCJA

FIVE STEPS TO SAVE THOUSANDS ON EQUIPMENT WITH THE TCJA

Save money with the TCJA

In 2017, President Trump signed into law the Tax Cuts and Jobs Act— a sweeping new tax law with far-reaching effects for businesses of all sizes (source: IRS). While pundits will debate its benefits for the nation, what can’t be denied is that it brings huge value to business owners and their bottom lines. Of the $1.5 trillion in lowered tax liability thanks to the TCJA, $950 billion of that number will go to the business sector (source: Ernst & Young).

One of the most powerful impacts of the TCJA is the way it makes Section 179 tax regulations and bonus depreciation work for businesses. The idea of delving into tax law might not thrill you, but if you’re a business owner who’d like to save thousands or even hundreds of thousands on expenses—it should. It’s not as complex as it seems, and the new changes in the TCJA could transform the way you manage equipment costs and other business costs throughout the year.

Steps to Make TCJA Work for You

Here are some steps you can take to make the TCJA changes work for you:

  1. Take time to understand Section 179. Section 179 outlines how businesses can write off the expenses of qualifying equipment in their annual tax filings. The problem used to be that businesses could only write off amounts based on the depreciation of their equipment. If you purchased or financed equipment for $100,000, you might only be able to write-off around $10,000 per year in depreciation.
    With the introduction of the Tax Cuts and Jobs Act, you can now write off the entire cost of most equipment purchased and used during the year—up to as much as $1,000,000 for 2019. The best part is that this write-off even applies to equipment that you lease or finance. We’ll cover that more later, but for now let’s take a look at the types of equipment that qualify under Section 179.
  2. Learn the types of equipment you can expense. The Tax Cuts and Jobs Act not only increased the total cost you can deduct in equipment expenses, it also expanded the types of business equipment whose costs you can deduct (source: Section179.org). If you purchase or finance and put into use any of the following equipment during the calendar year, it can be claimed on that year’s taxes:
    1. Equipment purchased for use by your business, including machines and other physical equipment
    2. Vehicles with a gross vehicle weight (GVW) greater than 6,000 pounds used for your business
    3. Computers
    4. Office equipment and office furniture
    5. Software that has been purchased from a third-party and hasn’t been custom coded for your business
    6. Qualifying equipment that’s used partly for business and partly for personal use; deduction is based on percentage of business use versus personal use
    7. Equipment and property that are attached to your business’ physical building, including large manufacturing machinery or other equipment; structural elements of the building don’t qualify
    8. Non-structural improvements to your existing commercial building, including HVAC or roofing and security systems
      As you can see, a large majority of the equipment you might purchase for your business qualifies for the TCJA’s raised deduction limits. So do your research to ensure that you claim deductions on equipment everywhere you can.
  3. Harness the bonus depreciation increase to 100%. Under the TCJA, bonus depreciation has increased to 100% for 2019. That means that even after you’ve used your Section 179 deduction to lower the purchase price of new equipment, you can take an additional bonus depreciation deduction of 100% of what remains. This 100% bonus depreciation isn’t permanent and will likely be lowered in 2023.
  4. Finance business equipment to boost your bottom line. With the increased power of Section 179 and bonus depreciation thanks to the Tax Cuts and Jobs Act, choosing to lease or finance equipment in 2019 could be more profitable than you can imagine. Think of it this way—you can deduct the full purchase cost of equipment without paying the full purchase price for that equipment. For example, let’s say you finance $50,000 worth of machinery beginning in November of 2019, with monthly payments of $500. By the end of 2019, you’ll have only spent $1,000 on your equipment, but will be able to deduct tens of thousands of dollars—the full price it will cost to finance that equipment.
  5. Qualify and save. Besides falling under one of the categories listed in the Types of Equipment You Can Expense section above, there are a few other conditions your equipment will need to qualify for these deductions and savings. The equipment must be bought and put into use in the year its claimed, and the used equipment must also be new to your business. Similarly, you can’t lease or purchase it from an entity with direct connection to your business.

Beyond these conditions, the equipment can be bought, rented, or financed and still qualify for complete Section 179 and TCJA deductions and bonus appreciations.

Financing equipment for your business rather than paying cash has always been a great way to maintain cash flow for your business. But the TCJA act has radically boosted those benefits by letting you deduct the full cost of that financed equipment during the tax year it was put into use.

Recent Posts

Gauging The Growing Pains: The Hidden Costs Of Brewery Expansion

Hidden Cost of Brewery Expansion

Gauging The Growing Pains: The Hidden Costs Of Brewery Expansion

Hidden Cost of Brewery Expansion

As a brewer with a passion for your product, the last thing you want to do is stand still. If you make beers that people love, you everyone to have a chance to enjoy them. There’s no doubt, then, that you’ll expand your sales at the first opportunity. But before you do, you should be aware of the costly challenges that brewers face as they grow larger, including:

Big League Branding

As a local brewer, you had automatic authenticity with your customer base. You understood their culture, cuisine, and drinking habits, and could thus cater directly to them. But as you expand into other markets, you’ll have to start selling to people you don’t know as well. It will thus be an uphill battle getting them to try your beers instead of sticking to their current favorites.

To build authenticity in a community you’re not part of, you will need to conduct comprehensive market research and build a tailored publicity campaign. This strategy is expensive and takes time, so make sure you have access to flexible, affordable working capital to pay for a campaign every time you expand into a new market.

A Cornucopia of Codes

Brewers are subject to a host of health and environmental regulations, and those regulations vary across local, state, and (especially) national lines. Thus the more you expand, the greater your likelihood of running into regulatory issues. Your best bet is to research all the laws and statutes every time you move into a new jurisdiction, and do everything you can to comply with them ahead of time. But this can be expensive, especially if you have to invest in new equipment. Thus make sure you have either the savings or the working capital to make costly investments upfront.

Climbing Capacity

Expanding your operations frequently requires adding production capacity, which means investing in expensive capital equipment. The problem with such investments is that you have to make them months before you achieve any sales in the new market. Consequently, you’ll need to raise a large supply of cash as soon as you make the decision to expand. Unless you have ample cash on hand, working capital is likely the best way to raise this money. Even if you do have cash on hand, you might still want to use working capital, as it will prevent you from tying up all your money in expensive equipment investments.

To learn more about working capital for brewers and countless other businesses, contact Dimension Funding today.

Recent Posts