Impending Rate Hikes & Market Volatility...there is refuge in Equipment Finance

We’re not here to tell you what the markets will or won’t do after a rate increase..  But like you, we’re doing our best to follow the Fed’s confusion and the potential reaction of the market once they make a move.  Although there are obvious consequences of a rate increase, there is still a lot of speculation regarding the overall impact it will have to the global economy.

This said, you’re likely of a school of thought where you either believe; 1.)  Rates are going up tomorrow and it will cause a global domino effect where the markets will crash, i.e., not a rosey picture, 2.) A fed rate increase is a good thing and the markets will gracefully adjust, stabilize, and continue upward, sounds glorious, 3.) Somewhere in between, or 4.)  Who cares about the fed, it's a global economy, just look at how LIBOR has been impacted recently.

No matter your position, one thing we can agree on is rates will be going up, if not tomorrow, sometime in the not so distant future.  And for every US based company, large and small, this will impact their ‘buying power’ when it comes to leveraging financing for fueling growth.

Intro, Equipment Finance...

There are a myriad of benefits a well structured Equipment Finance facility will deliver, but the key point we’re making here is that it can be a very nice hedge against a fed rate increase and the volatility likely to follow.

The capital available in this quiet $1 Trillion industry (roughly 7% of the US Economy), is meant specifically for financing essential use assets (equipment and software) for businesses.  The chart below references a few of the qualities present that would be very nice to have in place when a rate hike hits.

Gain more clarity re. these hedge qualities  here  --> 

Gain more clarity re. these hedge qualities here --> 

Leadership Lessons - Brian Fleming (OSI Interview)

I was recently asked by our trusted partner,  Open Spectrum, Inc. , to participate in an interview to discuss the topic of leadership.  Thank you Sean Tario and OSI for the opportunity.  The interview was conducted by  Reesa Abrams  and it ended up being a very meaningful exercise.  There is something more significant and confirming to see it in writing.  It's a concrete reminder for me to stay true to my word and walk the talk.  If you're a colleague of mine, and you find me not walking my talk, call me out!  It'll be much appreciated.    Brian Fleming - Managing Member - FORT Capital Resources      Full Interview Here:    http://openspectruminc.com/leadership-lessons-brian-fleming-interview/

I was recently asked by our trusted partner, Open Spectrum, Inc., to participate in an interview to discuss the topic of leadership.  Thank you Sean Tario and OSI for the opportunity.  The interview was conducted by Reesa Abrams and it ended up being a very meaningful exercise.  There is something more significant and confirming to see it in writing.  It's a concrete reminder for me to stay true to my word and walk the talk.  If you're a colleague of mine, and you find me not walking my talk, call me out!  It'll be much appreciated.

Brian Fleming - Managing Member - FORT Capital Resources

 

Full Interview Here:  http://openspectruminc.com/leadership-lessons-brian-fleming-interview/

Call to Action - keeping corporate tax incentives in place!

Q:  I think I’ve heard of this…is this the same thing as Section 179?

A:  Yes - More specifically, this bill is known as H.R. 4457 or America’s Small Business Tax Relief Act of 2014.

Quick summary of the bill:  Taxpayers will be able to expense up to $500,000 of investments in new equipment and property per year, with the deduction phased out for investments exceeding $2,000,000 (see example below).  The bill also restores and makes permanent rules allowing computer software and certain investments in real property to qualify for section 179 expensing, subject to the overall expensing limit.  Finally, the bill will allow investments in air conditioning and heating units to qualify for section 179 expensing. The bill is effective for tax years beginning after 2013.

 

Q:  Doesn't the Section 179 tax incentive already exist?

A:  Yes, but it's set to expire at the end of 2014 where the expensing limit will drop from $500,000.00 to $25,000.00 if this new bill is not passed (which is dependent on the Senate).  Wouldn't be much of an incentive at the lower limit.

 

Q:  Does this bill include Bonus Depreciation?

A:  NO.  The bill to extend the bonus depreciation incentive has not been sent to the floor for a House vote yet.  We'll provide an update on our Blog and LinkedIn page once that is scheduled.

 

Q:  Ok, well does The House approval vote on 6/12/2014 guarantee the bill to be put into law?

A:  NO.  Although it’s a step in the right direction, The House approval doesn't guarantee anything.  It is then up to the Senate to do one of three things:

  1. Act and pass the bill
  2. Propose changes to the bill
  3. Ignore the bill entirely 

If the Senate passes the bill it is then sent to the Oval Office for final approval and sign off.

 

Q:  What happens if the Senate ignores the bill?

A:  If it's ignored and doesn't pass the Senate before the end of the 113th congress (January 2015) then the bill will be thrown out (we start from scratch) and under Section 179, the maximum deduction a taxpayer may elect to expense will be reduced to $25,000.

For perspective, let's look at a business who purchases or leases $750,000.00 of qualifying equipment in 2015:

If the bill were to pass:

Section 179 Example on $750,000

That's $175,000.00 in tax savings that can be used for:

  • Hiring additional employees, (good for the economy)
  • Investing in revenue generating opportunities & creating taxable income, (good for the economy)
  • Investing in additional equipment - driving revenue for the suppliers of the equipment, the resellers of the equipment, and service providers of the equipment,  while creating jobs and taxable income across the board, ensuring the growth and health of a business ecosystem, (good for the economy)
  • Subscribing to value added services - driving revenues for the service providers and their supplier network, creating jobs and taxable income, ensuring the growth and health of a business ecosystem, (good for the economy)

 

If the bill does NOT pass:

Section 179 $25k limit example

That's $8,750.00 (or $166,250.00 less) in tax savings that will eliminate each bullet point above and could have a broad negative rippling affect. (NOT good for the economy)

 

Q:  What can I do to help ensure the bill get's passed?

A:  Great question!  

  1. Sign the petition below - we need over 5,000 signatures for it to be sent.  Once we have critical mass, the petition along with a letter will be sent to the U.S. Senate Committee on Finance, the Chairman Ron Wyden, the Ranking Member Orrin Hatch, along with each individual State Senator in the states where we've confirmed support from you!

  2. Spread the word - share the petition and blog post with as many people as possible!  (share button below)

  3. Let us know of any questions