Compound Profit Blog

For small business, especially during the early stages of formation or launching, leasing equipment necessary for optimal functioning is often the only available option. However, leasing equipment may actually be a smarter option then obtaining a loan for the purchase of equipment for many businesses, regardless of individual circumstance.

When examining and managing financial statements, a monthly lease payment is considered a monthly expense, while a loan payment is considered a debt. While the overall impact on financial liquidity and available capital may be the same, the way that financial institutions and economic reports evaluate a debt and an expense are extremely different. For a company seeking new investors or further lines of credit, an improved net worth is a tremendous advantage.

Further, a monthly expense such as a lease can have an immediate impact on current year taxes, while equipment depreciation is handled in a different manner. Leasing equipment is almost always going to offer the greatest immediate tax relief of all available equipment options.

For the most part, leasing companies will also have less stringent financial requirements then the average loan department of most banks, especially during the current credit crunch. This makes it easier for start-up business or those with a less established history of credit to obtain a lease agreement than it is to obtain a loan at a desirable rate. Leasing companies may also offer an agreement that does not require a down payment, or one that includes the cost of monthly maintenance. Both options provide increased liquidity and capital availability then a loan related option.

Leasing equipment has the added benefit of not investing company long-term company assets into equipment that may be outdated before the completion of the loan agreement. This is an especially real concern in technology driven sectors. Leasing allows a company to react to advances or changes in the equipment field with a greater level of fluidity.

Though the cost of leasing equipment is more expensive over the life of the equipment, depending on the individual financial situation, and the overall strategic vision of the company, leasing equipment might be the superior option for small business owners.

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Everyone knows that equipment leasing offers several important benefits to any company, starting with easier access to funding, financing which also covers the costs associated with installation and maintenance, perpetual access to new technology, tax savings, and so on.

What very few people realize, though, is the fact that equipment leasing comes in different flavors, and that some of the leasing options will work better that others for a particular company. So how do you choose the proper lease for your business?

First of all, make sure that you’ve got a clear, easy to understand lease contract. What are your obligations? What are the leasing company’s obligations? You want to make sure that these obligations are stipulated clearly in the leasing contract.

Then, make sure to compare at least a few offers; you will want to look at the cost per month, possible upgrades / replacements for equipment that becomes obsolete, renewal terms, customer training, etc.

Make sure to check what happens with the maintenance part of the contract; most companies will have a separate contract for it, but you will definitely need to find out what happens if the leased equipment gets damaged. How much time will they need in order to fix or replace it? If you’ve leased a car you can probably use the bus for a few days, but if you’ve leased a critical piece of equipment which prevents the entire production line from doing its job, you will want to have the fastest response time from the service team.

What happens when a new equipment model is released? Will they upgrade the existing equipment right away, or will you have to wait until the old contract expires? These are just some of the important things that must be taken into account when you are considering equipment leasing.

It’s sad, but true: many contracts include hidden fees these days, forcing you to pay for training and other services you might not be aware of. It’s clear that with complex equipments, you will need to get some of your employees trained after all, but make sure that all these costs are detailed in the contract.

Another aspect: don’t assume that the equipment you’re leasing includes everything that’s needed in order to run properly. As an example, if you have leased a PC, it might not include Windows, Microsoft Office, etc, forcing you to buy them separately or to use free software that might not be compatible with the standard applications.

Compound Profit offers honest equipment leasing services with fast approvals – even for startups! Contact us for more information.

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If you plan to open up a new business, you have to be prepared to invest some money into it. And while some of the business ideas can be set up for the initial run using only a few hundred of dollars, most of them will require you to invest tens of thousands of dollars into the needed equipment. Sadly, since most aspiring entrepreneurs don’t have that kind of money at their disposal, this marks the end of their entrepreneurial dreams.

If this sounds like your story, you should definitely consider equipment leasing. Through equipment leasing, you will be able to buy the needed equipment and use it without having to support the upfront costs. In addition to this, you will also void the risks of assuming ownership; this means that if a particular equipment piece loses its value because of the technological advance, you can easily lease a new piece that offers greater productivity, reduces costs or is more environmental friendly, while saving a lot of money. Other benefits arise from having the possibility of overcoming the limits set on your company’s budget and enjoying several tax benefits.

Few people realize that through equipment leasing, they are actually conserving their company’s working capital, thus being able to grow it faster and allow it to be prepared for any unexpected events. Also, since the lease intervals are usually bigger than the ones used for the bank loans, the payment terms offer greater advantages. And one more thing: the leasing terms can be negotiated on a “per case” basis – that’s something you won’t be able to find so easy in the “real” lending world.

Many business owners are already using all these advantages, choosing to get the needed equipment for their companies through equipment leasing. And while most people think that leasing the equipment is an appropriate solution for big companies, the size of the company doesn’t really matter. In fact, small businesses can get a greater return on investment out of equipment leasing most of the time, because this gives them the ability of using modern technology, software, etc that would otherwise be inaccessible, in order to obtain greater and greater profits.

Let’s take a real world example: a self-employed graphic designer who could either lease the latest and greatest version of Adobe Photoshop or work with a much cheaper alternative, which doesn’t have all the needed tools and has trouble importing and / or exporting the various file formats, etc. Another example: a construction company won’t be able to get bigger contracts because it can’t afford to purchase a more expensive piece of equipment, and thus misses the chance to expand its activity.

With equipment leasing, your company can grow naturally, without being limited by its working capital and funds. Contact us and let’s set up an equipment leasing strategy that will accelerate your company’s growth.

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ProntoLease is Compound Profit’s “micro ticket lease” financing option and can be used for products that cost from a few hundreds of dollars to tens of thousands of dollars. It’s the perfect financing option for business owners that want to increase their sales and profit by providing a quick financing alternative to their customers.

ProntoLease is a great choice for end-users that have a less than perfect credit score or for the ones that don’t have any credit; nevertheless, it is a perfect match even for the end-users that have a perfect credit score and are looking for a financing option that’s suited for small value products and / or are aware of the potential tax benefits that arise from using this financing option.

As an example, many small businesses that are in the “signs and vehicle wrap” market use our micro ticket leasing product, because it’s a financing option that increases their sales in an area where, because of the small profits, no other financing company is interested in. The advantages for the “signs and vehicle wraps“ business owners are obvious:

- You benefit directly by having access to a financing option from a company that has a greater approval rate than any other leasing company on the market;

- You can attract clients that can’t afford to use cash, credit cards or bank loans to acquire their signs and wraps. In fact, ProntoLease works fine even if your clients have poor credit or have just started their business;

- The approval process can take as little as 24 hours;

- Get the chance to up sell new clients and cross sell existing clients, giving them an alternative that eliminates their existing budget restrictions;

- ProntoLease pays your vendors half of the money up front, motivating them to more forward much more quickly with your orders.

We think that the most important benefit for the business owner, though, is the partnership that forms between his / her company and Compound Profit. Our success depends on your success, so we will offer you the best financing options in the industry, making sure that they are tailored for your specific needs. ProntoLease is just one of our many business financing solutions, so contact us today.

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Compound Profit designed to help small businesses get working capital

The Compound Profit Business Model requires a customer oriented Profit Advisor who is passionate about helping businesses get financing even in this tough economic climate.  The philosophy of founder James Penny is that small businesses must help themselves. 

Getting a small business loan has become harder and harder; the government is not going to help, and in many cases continues to pass laws that make it tougher to run a company and keep it in the black.   Here in Florida and around the country, we are seeing the decline of many businesses who are laying off employees just to stay alive with the hope that they can outlast the economic downturn and ongoing government interference.  Banks are finding it increasingly difficult to provide capital as regulatory guidelines tighten.

At Compound Profit, Franchise Owners such as myself want to provide assistance to businesses.  I have had the pleasure of meeting many hard working business owners who put in many long hours to provide services and products for their customers.  Some have already experienced success; others are just starting out, but have a dream and a passion.  Some were successful, but are now experiencing the impact of the economy.  Every one of those companies wants a way to increase their bottom line and / or have access to working capital.  At Compound Profit, we have services that can help increase revenue and decrease expenses as well as provide working capital. 

Here are some of our services that can provide or save working capital:

• Equipment Leasing
• Accounts Receivable Financing
• Purchase Order Financing
• Merchant Card
• Cash Equivalent Dollars (CEDA Program)
• Commercial Real Estate Mortgages

Here are services we provide that can increase revenue and / or decrease expenses:

• Accounts Receivable Financing
• Cash Equivalent Dollars (CEDA Program)
• Merchant Services
• Employee Leasing
• Collections Services
• Medical Billing

Each Profit Advisor / Franchise Owner has been trained in these services and can help the local business owners get small business loans and thus take their company to new levels.  Why not contact us today let us learn about your company, and let us offer creative, alternative methods to get the capital you need and grow your business?

Doug Linder, Compound Profit Tampa Bay, dlinder@cprofit.com

Phone: 877-386-3716 Ext 218, http://www.cprofit-tampabay.com

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Do you have the Working Capital Blues? 

Many small businesses are growing, even in this economy.  While this is a great problem to have, sometimes having adequate cash flow can be an issue.  How do I keep my inventory at levels that meet the demand, take advantage of sales / discounts, add or replace equipment that I need?  As sales increase, so do the demands for sources of working capital.  Compound Profit may be able to help!

As an alternative financing source, Compound Profit offers several services geared to help growing businesses with these issues.  One option is a MerchantCard program which gives you access to cash advances based on your company’s credit card processing volume.  For the company that invoices for services or products, you can receive working capital based on your past due and ongoing invoices with the added bonus of Compound Profit taking on the collection of your accounts receivables. 

Additionally, lease financing options are available for your equipment needs.  Rather than a large capital purchase, Compound Profit may be able to assist you in structuring your purchases as equipment leases with your local vendors, benefiting you and your equipment vendor.

Local Arizona franchise owner Christy Giroux states: "unfortunately, many business owners are being turned down by banks for varied reasons and don’t know there are other options.  We are trying to get the word out that we can help them improve their cash flow and purchase equipment without taking on more debt or increasing capital expenditures".

Christy A. Giroux - cgiroux@cprofit.com

AZ Principal / Regional Director, Compound Profit of Arizona

Cell:  520-909-7146 / Office:  877-386-3716 ext. 249 / Fax:  888-200-3379

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As I meet business owners at networking or social events within the Washington DC Metro area and tell them about what we do, the first thing I state is that Compound Profit is an “Alternative Business Financing” solution provider to the small business community. The first question that usually follows is… ”What is Alternative Business Financing?”

So what is Alternative Business Financing? In today’s tight economical times when traditional banking institutions have stopped lending money to small businesses and have slashed lines of credit by 30-50%, the small business owners must look at “Alternative Business Financing” solutions or tools to stabilize and grow their business. That answer makes sense but usually does not make the proverbial “light bulb” go off. So these are examples of Alternative Financing Solutions that are available to the small business owner to help them grow and expand their business:

• Accounts Receivables Financing – Factoring, as it is most commonly referred to, is the practice of selling a company’s customer invoices (B2B invoices) to an authorized 3rd party (otherwise known as the Factor) and they will advance your company up to 90% of the invoice amount, collect the money from your customers, and then refund you the remaining 10% minus their processing fee. Unlike banks or other lending institutions, these companies do not lend based on your credit, but focus mostly on your customers' credit worthiness and / or strength in repayment. This is a great way for businesses to better manage their cash flow, purchase needed inventory, or cover operating expenses. There is no need to wait more than 30 days to be paid by your customers when you could take that capital and generate even more revenue for your business in only a few days. Our Smart Capital Advance program is an example of this type of solution.
• Friends & Family - If a bank is not willing to give you a loan, sometimes friends and family are more than willing to provide you the initial seed money or working capital for your business. Usually, friends and family can be the best source of financing because they know you well, and understand the social consequences of you failing to repay their investment.  However, sometimes it is best to keep business and personal relationships separate; otherwise, you risk to ruin those personal relationships. If you do move forward with getting financing from friends and family, make sure that you get all agreements in writing, even if your family members insist that it isn’t necessary.
• Purchase Order Factoring / Financing – Similar to Accounts Receivables Financing, Purchase Order Financing is the advance of funds to a company, based on the amount of the purchase order, so that the company can fulfill the purchase order. Purchase Order Financing is a solution that enables small businesses to go after and fulfill large orders. When used correctly, this can enable you to grow your company quickly. As opposed to bank financing, purchase order funding does not rely on your business credit profile, but rather on the financial strength of your customers. In other words, if you sell products to large companies or to government entities, purchase order funding can be a great way to finance those sales. To qualify for purchase order financing, your company must sell products. An ideal candidate for this type of financing would be a product reseller or distributor who is buying products from a supplier and then shipping the products to the client. Purchase Order Factoring is one of our core solution offerings as well.
• Angel Investors - Angel investors are private parties, and sometimes businesses, that invest their own funds into selected businesses. The angel investor becomes, in essence, a stockholder in your company, and is as concerned about your business' success as you. Each investor establishes his own guidelines, application methods and standards.  Angel Investors do require a fair amount of documentation (i.e. business plan, sales forecasts, sales and marketing plan) before they will invest any funds. In addition to that, the business owner must be willing to give some equity in the business to the angel investor.
• Merchant Cash Advance - Merchant Cash Advance programs grew from accounts receivable financing solutions. Merchant Cash Advance is a financing solution based upon the merchant’s future credit card sales. Specifically, the lender purchases a portion of the business' future credit card sales at a discount, the rate of which is generally based on the business' sales volume and history. In order to receive a cash advance, a business must be operating for a minimum of three to six months and must process a minimum amount of credit card sales (around $3,000 a month). Many lenders provide a short online application that can be reviewed within 24 hours. After approval, most lenders can send the money within a week. The merchant will receive all the money, while the lender collects a fixed daily percentage of the business' credit card sales until the debt is paid in full. Our Merchant Card program is an offshoot of Merchant Cash Advance programs within the industry.
• Peer-to-Peer Lending - With peer-to-peer (P2P) lending, the financial transaction occurs directly between individuals or "peers" without any involvement of a traditional lending institution. Companies such as Prosper.com monitor an online marketplace where borrowers post their loan requests and are connected with lenders who "bid" on the chance to finance the loan. P2P business loans are usually limited to $25,000, and if you default on your P2P loan payment it can negatively affect your business credit profile.
• Equipment Leasing – Leasing vs. Purchasing is a question that small businesses ask themselves every time they need equipment. Leasing offers many benefits over actually purchasing the equipment. For example, leasing does not require large down payments of cash, which can be put to better use inside the business to pay for current operating expenses. In addition, some leases allow customers to expense 100% of each monthly payment, thus resulting in a real tax benefit to the customer. We offer many types of leases: Small Ticket Leasing, Commercial Leases, and Municipal Leases but this is a discussion for another day.

These are just some examples of alternative financing solutions that are available to small business owners. By using these alternative sources of capital, many business owners will be able to grow their business to a point that they do become creditworthy in the eyes of their financial institutions. Compound Profit is the #1 Brand in Alternative Financing and we have a variety of solutions to help small businesses grow and expand their business.

Anuj Mehta, Regional Director/Principal Advisor

Phone: 877-386-3716 ext. 221

Fax: 877-490-4224

http://www.cprofitdc.com

amehta@cprofit.com

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Ready, Set, Go for those Government Contracts!

In the past year, construction companies across the country have seen many of their options dry up and are seeking new opportunities outside of their normal scope. There is a huge area of opportunity for small businesses in the government arena.  Many of these contracts give preference to the small local business owner / vendor.  Yes, there is a great deal of paperwork required, but the potential rewards can be very substantial.  As an alternative financing provider, Compound Profit may able to provide you with the backing you need to confidently go after these contracts.

First, we can help businesses seeking to provide finished products / equipment to the government (basically buy and resell items).   Our system of purchase order financing and factoring can support you in acquiring / delivering the products and then advancing you cash when you invoice the government.  We are also able to help with some of your government construction projects as well.

Additionally, we may be able to help you acquire the additional equipment you will need to fulfill your government contracts financing needs through our equipment lease financing – a service we may be able to provide through your regular vendors.  Rather than having a huge capital outlay for equipment, we provide funding that allows you to do monthly lease payments.  Your equipment vendor receives their payment quickly, many times half on ordering, with the remainder of cash on delivery of your equipment.  It’s a win-win situation for everyone involved.

Finally, sometimes the government wants assurance that you will have the funding available to fulfill the contract.  We can work with you on pre-approval for your contracts and provide you with documentation to indicate that you have adequate financing in place. 

Even better news – this process works with non-government contract bidding as well.  Christy Giroux, new Compound Profit of Arizona franchise owner and Regional Director, states, “As a small business owner and veteran, I’m reaching out to other small businesses to see how we can help them sustain and grow their businesses.  We want to increase their opportunities and profits.”

Christy A. Giroux - cgiroux@cprofit.com

AZ Principal / Regional Director

Compound Profit of Arizona

Cell:  520-909-7146

Office:  877-386-3716 ext. 249

Fax:  888-200-3379

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Business lending solutions – who can help?

I have heard the question asked lately “when will banks start lending to small businesses again like they used to”.  The answer I hear from many recognized experts on the subject is “probably never.”

Now before you cringe, stop and think about this for a minute.  During the bull markets of the 80s and 90s, when our economy was supposedly sound, money was relatively cheap and easy.  And while some may have seen these as the “glory days”, in truth it did nothing more than mask some bad decisions and practices by both borrowers and lenders.

We saw people pour money into the stock market without any thought as to the instruments they were buying.  The thought process was their money would continue to grow at ten to twenty per cent a year and their retirement strategy was built on this myth.

We all know how would be non qualified buyers actually obtained mortgages for homes they could not afford, putting nothing down and paying interest only.  How’s that working for us?

So it is easy to point at the banks today and say “see what you did”.  But the fact is there is plenty of blame to go around.  Just like an uneducated decision in personal investments for many had catastrophic outcomes, so too did the borrowing practices of many businesses.

Loans came easy and the more money one “needed” for their business the more they would get.  Business growing through the roof?  Take on more debt to pay for the inventory.  Your fleet of trucks not as shiny as they used to be?  Take out a loan and buy some more. Money was cheap and money was easy.

But were those the good old days?  Not at all! Today the business person must be calculating and intelligent about how he or she finances the business.  With banks lending practices significantly altered, the popularity of alternative financing is booming and financial instruments long overlooked are moving into the forefront.

Take AR factoring for example.  Often viewed as a tool for less successful or desperate businesses, now thriving companies are leveraging their invoices for growth.  By selling their receivables to a reputable third party for a discount, these businesses now have cash in hand to invest back into their business without taking on additional debt or selling a part of their business.  Born out of necessity, this practice is proving to be a far better alternative to high growth companies.

Leasing and micro-leasing is also becoming more and more prevalent. Businesses, in order to survive, are looking to protect their cash reserves.  By leasing equipment, signage, or any asset they can they are able to take full advantage of available third party money to grow their business.  Even if the rates are higher, if an investment in an asset shows a positive return (say a new truck) the prudent owner is leasing that product.  As long as the return on the investment is greater than the cost of the lease, it is a wise choice.

Of course positioning yourself properly is always the most important way to secure the financing you need.  Know your numbers, have your house in order, and be able to articulate your needs.  As a start up, try to keep six to eight thousand dollars in your account for six consecutive months to give lenders the confidence you can repay your debt. 

The bottom line is funders, as investors, do not want risk.  They want a guaranteed return on their money.  The better job you can do to assure them their investment in you is safe, the better you will be at attracting the financing you need for your business.

Alex Cherlin is a Cash Flow Expert with Compound Profit of Virginia. Contact him - acherlin@cprofit.com - for more information.

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To Wrap or Not to Wrap? Measuring Return On investment for car wrap advertising & financing

Do you often wonder if you are getting the best value from your marketing investments? You are not alone. As a business owner, you know that advertising is the key to sustained business growth; but how can you be sure that the company’s message is reaching potential customers? Determining the return on investment for advertising dollars is a major challenge for businesses. Marketing firms often suggest using multiple forms of advertising such as radio, television, newspaper, magazines, yellow pages, online campaigns, and direct mail but are reluctant to comment on potential results. And it is clear that business owners would gladly invest more in advertising methods if they could be more confident in their effectiveness.

How would you like to have a rolling billboard sending your message across town? Using a vehicle wrap, you can have your company’s name, telephone number and key selling message traveling the busy streets of your town. Car warps are vinyl advertisements that adhere to your car or truck and last for years without damaging your vehicle’s paint. They are vibrant and dynamic forms of advertising.

How can you be sure the vehicle wrap is working? Research from 3M has been able to determine the effectiveness of moving billboards, or fleet advertising, through the study of Global Positioning Systems installed in trucks and traffic counts. The study was performed by the Traffic Audit Bureau (TAB), an independent non-profit organization that authenticates the circulation of out-of-home advertising such as billboards. In the recent trial, one truck reached an estimated 40,585 people a day in Chicago, where an average Chicago billboard reaches about 48,000 people. While the exposure is comparable, the cost for fleet advertising is much less than the cost for traditional outdoor advertising, according to TAB. Polls also indicate that consumers are more aware of mobile billboards.

How can you calculate your return on investment for converting your company vehicle into a mobile billboard? Determine the dollar value of the average customer you serve. Divide that figure by your monthly lease payment to determine the number of customer your vehicle wrap must generate to pay for the advertising.

Print media, radio, television, and static billboard advertising can cost thousands per month. Yellow page advertising often costs several hundred dollars a month. Businesses can lease vehicle wraps through Compound Profit’s ProntoLease starting at $99 a month. I strongly believe that advertising your business by wrapping company vehicles should be the cornerstone of your marketing efforts.

Check out this article on car wrap financing to find out even more about the benefits of car wrap financing.

Stephen B. Lepley, MBA, D.Ph. - slepley@cprofit.com

Compound Profit Business Development

Phone: 877-386-3716  Ext 230

Cell: 423-605-4224

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