Equipment purchases are big decisions, as well as expensive decisions. Many label converters do not have excess cash available to invest in expensive assets. Price can be a significant barrier to entry into the digital arena, for example. The good news is that converters have the option of renting or financing a press, whether new or used. Additionally, there are significant tax advantages for those purchasing new equipment, as well as those opting for a rental plan.
Chris “Fletch” Fletcher is a senior account executive at Crest Capital, a national equipment finance company. He is also known as “The Lease Guy”, reflecting his area of expertise. Fletch is urging manufacturing companies to take advantage of Section 179 of the U.S. Internal Revenue Code, which allows equipment purchasers to fully deduct the cost of certain newly purchased assets. But, he says, your business can also lease and take full advantage of the Section 179 deduction.
Fletch says, “All I see in the news is inflation and rates. I hear that everything costs more. But I never hear of the greatest business incentive ever invented – our friend Section 179.”
According to Fletch, in 2022 Section 179 is better than ever. “Here are some numbers for you,” he says. “The deduction is a solid $1,080,000. That’s one million eighty thousand dollars (up 30,000 from the 2021 limits). The total amount a business can spend before the deduction begins to decrease is $2.7 million. The above is simple – it means you can deduct the full price of qualifying new or used equipment, up to $1,080,000. And when you reach a total of $2.7 million spent, then the deduction decreases dollar for dollar. Most small businesses will never reach that amount spent, so it’s really big. This means that virtually anything you buy for your business can be 100% deductible (almost all tangible business equipment, new or used, is eligible).
Regarding Section 179, Fletch highlights how funding increases your leverage. He calls it a business hack. “If you finance Section 179 equipment, you’ll likely save more on your taxes than your total payments this year. Here’s an example: Let’s say you finance $100,000 equipment over the summer. You deduct it all at the end of the year. At a 35% tax rate, that’s $35,000 off your taxes; that’s real money left in your bank account. summer at the end of the year, let’s say you pay about $12,000 in financial payments for this equipment. So you saved $35,000 in taxes and paid $12,000 in payments. Your net saved is 23,000 This means that gear technically costs you nothing this year.
“Plus, it’s increased your bank account by $23,000. AND you have to use the equipment to hopefully generate more income. Yes, it’s real… It’s just the best tax deduction imaginable , and it’s the one every business should be using every year,” says Fletch.
To get used to
As supply chain issues wreak havoc across the board, this has been a boon for the used equipment market.
“Second-hand ‘everything’ is all the rage right now,” says Fletch. “When companies can’t find a new version of the equipment they need, they turn to the second-hand market. Additionally, many businesses have closed or their owners retired during the pandemic, but their machines are bringing in solid sums of money. Whether sold through dealerships, auctions, or private equipment sales, used equipment is always very tough. »
Fletch points out that despite the “pessimism” we hear and read about, many industries reach out to him daily to inquire about equipment financing, illustrating just how well certain manufacturing sectors perform. And luckily for label converters, their industry is one of them.
A home rental program
Label converters can also be grateful to industry OEMs that have an in-house equipment rental program. One such supplier is digital press manufacturer Domino.
Mark Herrtage, Chief Financial Officer at Domino, explains, “The Domino internal leasing program allows customers to pay for their new Domino N610i UV digital inkjet label press over a period of time, typically three to five years with payments fixed monthly. In the United States this is called a dollar buyout lease, and in other parts of the world it is called a financial lease, but it is actually a purchase of capital whose payments are spread over a period of time. Thus, at the end of this period, the customer would then become the owner of this press.
“If I had to sum it up, our in-house leasing program offers attractive low rates, with fixed monthly payments, no large cash outlays, no personal guarantees required and no banks or third-party leasing companies involved. You deal directly with Domino. We have a Ramp-Up program with deferred payments – bundled with service, maintenance, training, printhead and digital solutions programs. We also have a time-tested take-back guarantee. The benefits are endless with this simple, easy and flexible program,” says Herrtage, noting that most customers use the in-house rental program instead of an upfront capital outlay to acquire a Domino press.
Patrick Wafer and Ryder Fyrwald, owners and co-CEOs of Cover Label, took advantage of the program. The saying goes: “One of the great things about the Domino funding program for us is the ability to invest in other things: sales, marketing and hiring new employees are all ways we will grow the company, and with the funding, it allows us to do that. We don’t have the money available to buy one of these machines. So having a financing option and the ability to pay it back over time, along with really attractive rates, made it a no-brainer for us.
Herrtage adds, “At Domino, our customers are our business partners. Our leasing programs are for all businesses, whether it’s a small business that needs financial assistance from us or large corporations that simply want to be able to protect their own cash flow. or invest in other areas. We help them with that. And one of the benefits of the Domino Rental Program is that it’s also backed by our Trade-In Guarantee Program. If something new is launched and you want to switch to that, we’ll take back the press you have, and simply recreate a lease for you. We have a very strong exchange program.
Answering the call for a cost-effective way to enter the digital label market, Xeikon launched its REX program. REX, which stands for “Remanufactured – Ecological – Xeikon Quality”, helps printers looking for affordable entry-level digital production equipment to meet their customers’ demands for shorter print runs, just-in-time production. time and customization.
Jeroen Van Bauwel, Director of Product Management at Xeikon, says: “Xeikon has been offering digital presses to the market for over 30 years. But often our customers’ digital business runs faster than their press and after a few years they already have to reinvest in a faster model. The returned press still has a long life ahead of us, so with our REX program we are remanufacturing these older presses by running them through our factory, implementing all recent updates and upgrading the digital front end to the latest version of our workflow: X-800 6.0. Presses that have passed through the REX program are then again offered on the market at a very attractive investment cost. Through the REX program, we make our famous digital presses accessible to novice digital converters, with limited investment budgets. REX stands for Remanufactured, Ecological, Xeikon quality.
The Xeikon 3030 REX is an entry-level press, which can immediately catapult converters looking to take their first digital steps into the professional and industrial space. It is a color digital press with the advantage of opaque white that provides access to the health and beauty, premium beer and other end-use markets in the space of the label. The 3030 REX uses food safety certified Xeikon dry toner technology, providing access to important food label markets. Dry toner is also fade resistant, allowing converters to meet label end uses that require durability.
Van Bauwel adds: “The 1200 dpi print resolution ensures that converters can also serve the high quality offset label market as well as the flexo quality market. Xeikon’s digital front end, the X-800 6.0, is the icing on the cake, as it can be integrated into existing MIS systems, enables fully automated job preparation and easily handles complex variable data jobs.
“In addition to the advantages of our press technology, a Xeikon investment can be seen as long-term security. If required, our presses can be field upgraded for speed and width as the business evolves towards this need. We believe the Xeikon 3030 REX will drive even faster digital adoption in the label market. Don’t force converters to make concessions on serving certain markets, but handle 90% of all end-use applications in the label industry. This will be an investment that can grow with their needs over time as their business evolves. »