The Lease Closer

Published BI-monthly by Granieri Associates for the Equipment leasing industry.

 

September/October 2001

 

Inside this Issue

ç The lease World

ç How to sell on the Internet

ç Sec 179 Season

 

The articles in this newsletter do not necessarily represent the views of Granieri Associates but the views of the writers themselves. If you would like to comment on a particular article please call Granieri Associates during their normal business hours (9:00 - 6:00pm)

 

Spotlight

ç Closer’s Corner

 

ç How to Sell on the Internet

 

ç Sec 179

 

Table of Contents

 

Sec 179…………………………………………………………………………………………..1

Cash vs Lease………………………………………………………………………………….3

Internet Data……………………………………………………………………………………4

Increasing Sales Through the Internet…………………………………………………….5

The Lease World……………………………………………………………………………….8

The Closer’s Corner……………………………………………………………………………9

 

 

 

 

 

 

 

 

 

Sept/Oct 2001 The Lease Closer        Page 1

 

Sec 179: A great year end closing tool

 

Tis the season folks, that’s right it is Sec 179 time for all you Top Gun closer out there. I have been extolling the virtues of this for years and I know it has helped a lot of people put a view more commissions in their pockets at years end. Let’s take a look at 179 in some detail shall we.

 

Eligible Property

Machinery and equipment

Furniture and fixtures

Most storage facilities

Single-purpose agricultural or horticultural structures

 

Ineligible Property

Buildings and their structural components

Income-producing property (Investment or rental property)

Property held by estate or trust

Property acquired by gift or inheritance

Property used in a passive activity

Property purchased from related parties

Property used outside of the United States

 

New Sec 179 Schedule

Year                                                       179 write off

2001                                                                             $24,000

2002                                                                             $24,000

2003 and after                                                           $25,000

 

The Rules

1.   The section applies to the purchase of tangible personal property. Write lease that are sales contracts E.G., $1 purchase options.

 

Sept/Oct 2001      The Lease Closer      Page 2

 

2.   The customer must take delivery of the equipment in the taxable year that he takes the deduction.

3.   If you place over $200,000 of tangible personal property into service in a taxable year, the 179 deduction is reduced by the amount of the overage.

4.   If there is a trade - in, the 179 deduction is reduced by the amount of the trade.

5.   We do not give tax advice. Be sure that your prospect consults with their tax advisor before acting.

6.   If the equipment cost is more than the allowable deduction in a given year, the lessee may depreciate the excess.

 

Sec 179 is a great selling tool to convert year end procrastinators to buyers. Let me show how this works.

Remember that Sec 179 of the Internal revenue code allows an individual to expense rather than depreciate tangible personal property used in the business at least 50% of the time. The maximum deduction for 2001 is $24,000.

 

Top Gun: “ Mr. Prospect, the only thing standing between us and your purchasing this piece of equipment is that you don’t want to put out the purchase amount this year. Isn’t that so?”

 

Prospect: “That’s it.”

 

Top Gun: “Let me make a recommendation to you that has made great financial sense to many of my customers. Let’s have the equipment  delivered an installed so that you may begin enjoying its benefits this year. Give me one advance payment of $350.00 on a forty-eight month lease on a $19,000 piece of equipment. Depending on your tax bracket Uncle Sam may give

 

 

 

Sept/Oct 2001      The Lease Closer      Page 3

 

you as much as $6,000 present under your Christmas tree. That’s a good trade, isn’t it.”

 

Here is how it works

COE: $19,000

Lessee’s tax bracket: 35%

$19,000 X 35% = $6,650.00

 

If you want to add another little twist to your selling arsenal offer your client a deferred payment program. An example would be to offer the customer a ninety day deferred payment program. He purchases the equipment in November. He makes no payments in Nov, Dec, and Jan, thus giving him the opportunity to have his equipment producing income without making a payment on it for three months.

 

 

Cash vs Lease

 

A colleague of mine passed this on to me.

 

Ex: $25,000          I=14%      N:48           #Adv: 1     Pmt: $636.59

 

Cash Analysis

National return on equity is 21% annually.

 

PV                                            FV Calculation

$25,000                                                     1. $25,000 +/- PV

2.   21 I%yr

3.   48 n

4.   FV: $57,489,97

Sept/Oct 2001      The Lease Closer      Page 4

 

COE: $25,000

Opportunity Cost: $32,489.97 ( money lost if not invested in working capital equity.)

 

Total Cost:                           $57,489.97

Less tax savings            $8,160.00 (one time deduction $24,000 X .34)                       $49,329.97

 

Lease Analysis

ç Assume a 34% Corporate tax bracket.

ç Payment $636.59 X .66 = $420.15 after tax payment

ç after tax payment of $420.15 X 48 = $20,167.20

 

 

: Internet Data :

Granieri Associates WebSite

www.granieriassociates.com

A wealth of selling information for the firing line leasing salesperson.

 

Michael Granieri e-mail: / Granite63@aol.com

(732-828-8891   (Fax 732-828-8887

 

The Financial Services Monitor: www.monitordaily.com

The “Wall Street Journal” for the equipment leasing industry

 

The Equipment Finance Journal: www.efj.com

An excellent supplement to the monitor

 

Other WebSites worth a visit

www.eael.org

www.uael.org

www.naelb.org

www.leasingnews.org

www.leasingissues.com

 

Sept/Oct 2001      The Lease Closer      Page 5

 

Increasing Sales Through the Internet

By Jon Haas, CLP

 

Linking to other websites is another point to consider. A link is a word or graphic on your site which when ‘clicked on” sends the viewer to another site. An example is if you get your vendor(s) to put a link to your web site on theirs so that when payment for their product comes up, their prospect is automatically taken to your site. Links are best, whether on your web site or on others linking to you, only when they are complimentary to your business and potentially beneficial to your prospect. The key  here is not to lose your prospect to the other site and have them surf from there and not come back to your website. Then best way to do this is for the links to open within a “frame” in your site so the surfer never leaves. A good example of this is “Ask Jeeves”, a great search tool (http://www.ask.com). Whenever you click on the responses to the question you have asked Jeeves, the answers come up within the Ask Jeeves web site, so you never leave there, but still get the information you need.

 

The next subject is designing your web site for maximum efficiency relative to making your business money. Do you want to do the task yourself or should you hire a professional web site designer? The question really boils down to whether you have the ability and time to do the work. If you do, there are software programs available, such as Microsoft Front Page 2000 or Macromedia’s Dreamweaver. These programs help you to create your web site and they automatically do the conversions to HTML, (hypertext markup language), the script of the web. Regardless of which way you will get the web site completed, you will need to provide an overview of what you want to accomplish with the site , as well as the content for the site.

 

 

Sept/Oct 2001      The Lease Closer      Page 6

 

Picking an ISP is the next step in the process of getting on the web. The ISP will “host” your website, in other words, get it up onto the web. Most ISP’s typically will provide you with additional services. Such as access and e-mail accounts. The fees should not be your only consideration in picking an ISP. Reliability and services provided are the critical issues in determining the best ISP for your site. You definitely want to have an ISP who has 24/7 technical services so when something goes wrong, you can reach a human technical support person to help correct the problem. A national provider is better if you travel and are going to use the same ISP for hosting and Internet access. Otherwise, find a company that meets your service requirements and open your account.

 

The way to attract prospects you do not yet even know about is through being listed on the web’s major search engines. These services list companies based upon variables such as type of business, service or product provided, even just a key word or phrase. Life is simpler and easier today, as there are services which will get your web site listed on all major search engines. Two such services, which I highly recommended, are www.searchenginewatch.com and www.selfpromotion.com .  Both these also have additional tools for design and maintenance of your web site.

 

Again, the purpose of this discussion is increasing sales by doing all of the aforementioned. Well, are you doing that yet? Yes and no. You need to have the website up and running. You need to make sure that the content and design get your message across and enable potential prospects to conduct business with your company. Now, once again, the question is asked, what so you want to accomplish with your web site? If it is to provide additional information about your company’s products and services beyond the printed material, you can do that with what we have described thus far. However, if you want

 

Sept/Oct 2001      The Lease Closer      Page 7

 

 to actually conduct active business, then there is more to be done. Before you groan and decide that this is too much, keep in mind that there are prepackaged programs from solid companies that will help you with your goals.

 

There are three companies that I have some familiarity. I believe, depending upon the level and type of service you need, they can be of great benefit to you. They are Capital Stream, Inc, BrokerWare, Inc, and Automated Resource Management, Inc. Each of these companies have programs and services which will do anything from getting you on the Internet, taking and tracking credit applications through decisioning them! If you are member of UAEL then you get the basic Capital Stream program with your paid membership, System 1.

 

Here are the websites for these companies if you would like more information.

www.capitalstream.com

www.isissystems.com

www.lease.a-r-m.com

 

Please note that I am not recommending any of the above programs, and I am sure that there are more than these available. I do have, however, cursory knowledge of these and know that they all are capable of helping your company develop your Internet strategy and presence. If you are looking for outside professional help, contact all of these companies to see which one is the best fit.

 

Keep in mind that even if you acquire professional assistance in your website development, the content on your site is going to be up to you decide upon and create. It is my belief that you should have a section discussing our industry, as well as a

 

Sept/Oct 2001            The Lease Closer            Page 8

 

separate section about your company history. Your site is there to generate business, so you need a section devoted to

products and services that you provide. These would include equipment leasing, vendor programs, what the processes are and possibly your rates. You may want applications available both on and off-line. This means that the prospect could print the application and send it via other than e-mail. A company listing may be worthwhile, depending upon how many staff you have and how specific everyone’s functions. Everywhere possible you will want to have hotlinks to your info line or e-mail.

 

There is a lot more to discuss here on this subject. The bottom-line here is that having a properly designed company website is necessary and almost expected in today’s world. You can use your website as an additional marketing tool, as a means to acquire additional business, or simply for communications. Regardless of its use, it will help your business image in the marketplace and make your company more visible.

 

 

The Lease World

 

The Pacific region of the US represents over one-third of total lessees and total UCC filings.

 

South Atlantic and Mid Atlantic regions have the highest propensity to lease.

 

 

 

 

Sept/Oct 2001      The Lease Closer      Page 9

 

The Propensity to lease increases with the age of the company.

 

From 1991 to 2001 equipment lease volume has increased from $124 billion to nearly $280 billion.

 

Of all the ways to acquire equipment leasing is the method most frequently used with all equipment types.

 

Lessees vary widely from small one person operations to fortune 100 corporations, and the kinds of equipment that are being leased are just as diverse.

 

To decide if leasing is your best option ask yourself these questions.

 

u How does the equipment make your business more competitive.

v What is the most efficient use of your cash flow to pay for this equipment.

w How long will you use it.

x What will your equipment needs be in the future.

 

_______________________________________________________

 

 

The Closer’s Corner

 

The Benjamin Franklin Close

 

Still one of the best by test.

 

“ Mr. Big. I’m sure that you’ll agree that we Americans consider Ben Franklin to be one of our wisest and honored citizens, isn’t that so? Well, when old Ben was faced with a decision like you are today., he would take a piece of paper (take a piece of paper)

Sept/Oct 2001      The Lease Closer      Page 10

 

and draw a line down the middle.” (Draw a line down the middle.)

 

“ On one side of the sheet he would write ‘Act Now’ and on the other side he would write ‘wait’. Ben reasoned that which ever side of the paper had the most reasons, that was the side he should respect. Make sense, doesn’t it? Let’s give it a try, okay?”

 

Now start writing down the reasons for acting now. Involve your prospect and make sure that he affirms every reason for going ahead with the decision to buy. You should be able to come up with at lest 15-20 buying points.

 

After you have completed the ‘Act now’ side of the ledger, give him the pen, ask him to come up with some reasons for waiting, and SHUT UP!. If he has a major objection, it will surface at this point and you can overcome and close. If not, he will list three or four points at the most and capitulate.