The Smart Startup’s Guide to Equipment Financing and Tax Benefits

Newly found startups may start little—but the sooner they invest in equipment—the better. After all, they must establish themselves as credible up-and-coming companies if they want to compete with the big guns.

But investing in equipment comes with a price—a hefty fiscal burden.

Fortunately, Beacon Funding offers investment solutions that help you manage your investments and raise capital over time. We leverage Section 179 tax deduction, which allows young companies to deduct the full price for the qualified equipment in the first year they acquire it.

Click here to calculate how much you can deduct.

This article explores how startups can maximize tax benefits for equipment financing, particularly through the lens of Section 179 deduction and bonus depreciation. Let’s get started!

What is Equipment Financing

When you need new equipment for your business, getting equipment financing is a smart fiscal move. You can use these loans to purchase nearly any type of business equipment, but how much you can borrow depends on the type of equipment you’re buying and whether the equipment is new or used.

Most businesses can qualify for equipment financing. How much you qualify for depends on the value of the equipment, your business history, and other factors. The good news is Beacon Funding's has a wide credit window which allows us to give you the best odds of getting approved. When we approve 7/10 businesses, chances are you can too!

Why Do Startups Need Equipment Financing?

Smooth business operations mean everything for startups who’ve just entered the competition. For them, inventory fully packed with tools and big equipment under the roof is everything — it's what stands between success and failure.

Beacon Funding finances equipment in niche markets – tow trucks, boom trucks, skid steers & compact track loaders for landscapers, screen printing machines, and embroidery equipment – providing our clients with sundry in-house assets, thus allowing them to focus on their business’s growth and development.

Tax Benefits of Equipment Financing

1. Section 179 Deduction

One of the most substantial tax rewards for startups is the Section 179 deduction. This IRS tax code allows businesses to deduct the full purchase price of equipment the first year they finance it.

For the year 2024, the deduction limit is set at $1,220,000 with a threshold of $2,890,000. Thus, start-ups can reduce their initial purchasing cost and focus on business operations more effectively.

Below are some more benefits of utilizing the Section 179 tax deduction:

Benefits of Financing Equipment with Beacon Funding

Immediate Tax Relief

You get tax relief from your invested equipment for the first year, thus reducing your expenses significantly.

High Deduction Limits

Companies can deduct up to $1,220,000 from their annual investment for the inducted equipment purchases for the year 2024. This reduces their taxable income considerably.

Encourages Equipment Upgrades

Drawing from full costs incentivizes businesses to invest in newer, more modern equipment, thus improving in-house operations efficiency and service quality.

Cash Flow Management

By investing in septic pumper trucks in conjunction with the Section 179 deduction, businesses maintain better cash flow and manage their finances. This allows them to invest in other business domains like R&D, marketing, hiring, etc.

Tax Planning Flexibility

Companies are able to strategize their equipment acquisition plans to maximize deductions during high-income years, optimizing their tax liabilities.

Accelerates Business Growth

Tax capital secured under Section 179 can be reinvested into the business to facilitate growth opportunities like increasing staff and expanding products/services.

Easy Inquiries

Beacon Funding connects you with accredited lenders if you utilize Section 179 tax deduction. These investors pledge to protect your credit score while giving access to necessary funds.

Supports Small and Medium-Sized Businesses

Section 179 is designed to support startups and small-scale businesses struggling to manage their finances. Beacon Funding follows suit — providing companies with loans with full access to Section 179 tax deduction benefits.

Bonus Depreciation

Businesses using the 179 Section for annual income reimbursements can also avail of bonus depreciation on new and used equipment. Thus increasing their tax savings.

Simplified Application Process

Acquiring equipment under the Section 179 tax deduction is a simple and quick process. Beacon Funding comes in handy here as they bypass all the checkpoints for you.

2. Bonus Depreciation

Besides the 179 Deduction Tax subsidy, businesses can also capitalize on bonus depreciation. Bonus depreciation allows companies to keep a certain amount of percentage pertinent to the equipment's cost in the first year when the equipment is put into service.

Astonishingly, the bonus depreciation amount has been declining annually. In 2023, it fell from 100% to 80%, and further reduction is expected in the coming years.

3. Immediate Cash Flow Benefits

Tax deductions are huge bonuses in disguise, as startups can utilize them to maintain healthy cash flows. The secured capital out of investments can be reinvested for other business ventures, such as hiring employees, running new marketing campaigns, or expanding product/service lines.

4. Building Business Credit

Investing in a loan to acquire equipment also allows startups to establish their line of business credit. In this way, these emerging companies can make timely payments for loans and leases to improve their credit history/score. Building business credit also helps startups to get future loans with much inquiry and paperwork hassle. Maintaining a good credit score is an invaluable addition to a company’s portfolio. It's not all about loans but also business credibility, social media presence, higher sales, customer trust, etc.

5. Flexibility in Financing Options

Equipment financing opens doors for different options for up-and-coming startups. For instance, a capital lease is a more substantial amount than a mere loan. Thus, the former has its own benefits. In this regard, startups can claim depreciation deductions, while loans on a lease can be great for lower monthly payments.

6. Preservation of Working Capital

Startups can secure their running profits to help them preserve capital for other business needs. So, instead of putting your budget on financing equipment only, it's 100% better to allocate funds for various domains. This will help harvest more capital and higher returns on investment.

7. Tax Planning Opportunities

Startups can formally plan their equipment purchases to maximize tax benefits. Startups can try getting loans and coincide with their profitable years. In this way, companies can reap the full benefits of Section 179, including bonus depreciation and reduced tax liabilities.

8. Access to the Latest Technology

Financing equipment isn't just about filling inventory or getting a vehicle to drive operations; there's more to it. Startups can purchase the latest technologies and machinery without paying a large upfront payment. Thus enhancing in-house operations, workflow management, and overall business services. This allows small companies with loan approvals to gain a competitive edge in the industry sooner or later.

Deadline Date and Considerations

Do you want to qualify for the Section 179 deduction plan and make the most of your tax benefits? Finance now with Beacon Funding to buy equipment before December 31, 2024. Remember, this year will mark your proceedings for the next year. So, plan your equipment purchases accordingly and take full advantage of deductions for the 2025 tax filings. Explore your financing options before the end of the year.

Act now before it’s too late! Unravel the numbers game and tally your anticipated return on investments accurately. Here’s the Section 179 Tax Savings Calculator to save you time and money.

Unlock Your Business Potential: Discover Equipment and Tax Benefits with Beacon Funding

Building a startup business from the ground up is not a walk in the park these days. It takes time, hard work, quality equipment, and good partners to help you.

Don't worry about your financial woes when Beacon Funding’s around. Our dedicated team is ready to stupefy you already. Geared up with maximum tax procurement and tailored equipment financing plans, our financing consultants are here to save the day—and your valued startup.

GET STARTED NOW

Enjoy tax return streams and experience seamless equipment today. Enter the business domain, dominate your biggest rivals, and conquer the industry landscape expeditiously.