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Buying Equipment from a Private-Party

Buying equipment in a private-party sale can offer a cost-effective way to get what you require to run your business. You can save money on dealer fees, delivery charges and, most importantly, the margin vendors put on top of their equipment price.

In this article, we explain what challenges you may run into and how to pay for your privately purchased equipment.

What is a private-party sale?

A private-party sale is a transaction in which the seller is an individual, not a dealer or vendor. This can typically occur at your local yard sale or on online platforms such as eBay and Facebook Market. Businesses often take advantage of private-party sales to acquire commercial equipment.

What precautions to take?

There are certain risks associated with buying equipment from an individual. While dealers may offer warranties on your purchase, a private-party sale is final. That means it is always better to take some precautions before accepting a pricey piece of equipment “as is.”

First, check the Title. Make sure the equipment belongs to the seller, is not stolen, and fully paid off.

Ask how they purchased it. A legitimate seller should be able to show you the Bill of Sale from the time they bought that piece of equipment.

Check for loans and liens. Ask the seller to verify that there are no outstanding loans or liens with their state’s UCC.

Do not pay cash. Use a payment method that provides evidence of the sale such as check, ACH payment, or a wire transfer.

Inspect the equipment. Ensure your potential purchase’s mechanical condition is sound. Private sellers typically sell the equipment they have used but do not need anymore. They may try to hide some malfunctions to sell faster.

Can I finance equipment purchased in a private sale?

Even when you find a great deal, sometimes, large equipment purchases can be hard on your cash flow. There are two easy options to avoid a financial hit and pay for the equipment over time.

Finance right away

Once you have found some options, you can ask a lender to pre-qualify you. The lender will then quote the maximum amount available to you. After you find the right piece of equipment and agree on the price, you can call the lender to finalize the purchase.

Finance after purchase

Let’s say you did not want to miss a good deal and used your company’s cash reserves to pay for equipment. Now you want to restore the cash balance as quickly as possible. This is called “sale-leaseback”. A financial product that allows you to get back the money you have paid and only make affordable monthly payments.

Who can finance a private-party sale?

At Alliance Funding Group, we have the flexibility to offer a large variety of equipment financing structures.

Talk to our Account Manager today to get pre-qualified for an equipment purchase without affecting your credit.

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Section 179 Yearly Tax Deduction

What is Section 179 Tax Deduction?

Section 179 of the United States Internal Revenue Code is a tax deduction that enables businesses to depreciate assets as an expense in the first year or the year they purchased an asset. All assets must be put to use by December 31 of the 2020 tax year.

Why should I care about this tax deduction?

In 2020, your business can deduct the full cost of qualified equipment purchases, up to $1,040,000, with a “total equipment purchase” limit of $2,590,000.

Besides, you can take advantage of 100% Bonus Depreciation on the “new to you” equipment this year.

How to calculate my savings from Section 179?*

A rule of thumb is to multiply the price of your equipment by your tax bracket. For example,

Equipment Purchase$1,150,000
First Year Write-Off$1,040,000
100% Bonus Depreciation$110,000
Normal First-Year Depreciation$0
Total First Year Deduction$1,150,000
Cash Savings (assuming a 35% tax bracket)$402,500
Equipment Cost After Tax $747,500$747,500
Example of Tax Deduction Calculation under Section 179, 2020

What qualifies as Tax Deductible assets under Section 179?

  • Tangible property or hard assets (such as machines, equipment, furniture)
  • Single-purpose agricultural or horticultural structures
  • Storage facilities
  • Off-the-shelf computer software placed in service during the tax year

What are the requirements?

  • New or Used equipment with a total price of up to $2,590,000
  • Must be acquired for business use
  • Must be put to use before December 31st, 2020

How can I benefit from this Tax Deduction?

AFG offers financing and leasing solutions that are compatible with Section 179. Benefit from tax savings this year and pay for your equipment over time.

Get a free quote on equipment financing today.

*The information on this site is for illustrative purposes only. Please consult with a qualified tax advisor concerning your specific situation.

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What is a Balloon Payment?

A balloon payment structure can be a convenient alternative to a bank loan if you need to start using the equipment as soon as possible or if you are looking for fixed interest and lower rates on your purchase.

A balloon payment is a lump sum payment attached to a lease. It is a payment that you would usually make at the end of the term.

Balloon leases are a hybrid of a traditional lease and a loan. While you make payments based on the depreciating value of an asset during the term, you have the option to buy it at market value or a pre-determined amount when your term expires.

It is a way to start using the equipment you need without a significant effect on cash flow. Instead of immediate down payment, your leasing agreement covers the entire cost of the asset.

Ballon leases are popular among seasonal businesses that may not have the right amount ready when the high season begins. Companies that find a rare deal on equipment may need to act fast and use a ballon lease structure to get what they want. With this financial product, you do not have to come up with a large sum of money upfront or wait weeks for approval.

Others use balloon leasing to try out new equipment that is not otherwise available. Unlike a purchase, they may return the equipment at the end of the lease term. On the other hand, if they choose to keep it, there is an established purchase price to plan for.

Being a privately-owned direct lender, AFG can offer creative deal structures for any business situation. Talk to our experienced Account Manager today!

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AFG Funds a Transportation Company Despite COVID-19 Related Challenges

  • Approval for a transportation company, a restricted industry among lenders due to COVID-19
  • Helped avoid lay-offs by providing quick funding
  • The client received enough funds to stay open as its SBA relief application is being reviewed

As American businesses are experiencing hardships in Q2 and Q3 of 2020, Alliance Funding Group helps small and medium-sized companies retain their financial welfare.

AFG’s Unsecured Working Capital Program has seen an increased demand in the past few months. Our VP of Working Capital Products, Mike Amezquita, has shared some details on a recently funded deal.

Solution

Courtesy Transportation out of North Carolina is a current leasing client of Alliance Funding Group. It has applied for government funding, provided by the Small Business Administration, to support its operations and cover payroll expenses. However, the waiting time for such loans is currently measured in months.

Mike worked with the company to help them bridge the gap before the expected government aid arrives sometime in the summer. He was able to secure an approval for up to $40,000 and up to 9 months with manageable weekly payments.

“I’ve been working in financing for over 6 years. I understand the equipment and typical challenges that passenger transport and hauling companies face. Courtesy Transportation among hundreds of our customers rely on AFG’s resources and experience to efficiently run thier businesses. I do my best every day to answer questions, educate them on financing and leasing products, and fund deals fast.”

Mike Amezquita, VP of Working Capital Products