Overcoming Costs

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Overcoming Costs
Leasing both new and used equipment is an affordable option for converters looking to acquire “must-have” equipment.
Steve Katz, Contributing Editor09.28.22
Acquiring new printing and converting equipment can prove to be a pivotal step towards label and package printing success. And in today’s fast-evolving market – with digital capabilities now considered a “must-have” as opposed to “nice-to-have,” staying ahead or at least on par with competitors is paramount.
Equipment purchases are big decisions, as well as costly ones.  Many label converters don’t have excess cash flow available to put down on expensive assets. Price can be a significant barrier for entry into the digital arena, for example. The good news is converters have the option of leasing or financing a press – both new and used. Plus, there are significant tax benefits available to those buying new equipment outright, as well as for those opting for a leasing plan.
Chris “Fletch” Fletcher is senior account executive at Crest Capital, a national equipment finance company. He’s also known as “The Lease Guy,” reflecting his area of expertise. Fletch urges manufacturing companies to take advantage of Section 179 of the US Internal Revenue Code, which allows equipment buyers to fully deduct the cost of some newly purchased assets. But, he says, your company can also lease and still take full advantage of the Section 179 deduction.
Fletch says, “All I’m seeing in the news is inflation and rates. I hear about how everything costs more. But I never hear about the single best business incentive ever invented – our friend Section 179.”
Accordiing to Fletch, in 2022, Section 179 is better than ever. “Here are a few numbers for you,” he says. “The deduction is a robust $1,080,000. That’s one million, eighty thousand dollars (up 30K from 2021’s limits). The total amount a business can spend before the deduction starts to decrease is $2.7 million. The above is simple – it means you can deduct the full price of qualifying new or used equipment, up to $1,080,000. And when you reach a total of $2.7 million spent, the deduction then decreases on a dollar-for-dollar basis. Most small businesses will never get near that amount spent, so this is really big. It means pretty much anything you buy for your business can be deducted 100% (almost all tangible business equipment, new or used, qualifies).
When it comes to Section 179, Fletch emphasizes how financing increases your leverage. He calls it a business hack. “If you finance section 179 equipment, you will likely save more on your taxes than the total amount of your payments this year. Here’s an example: say you finance a piece of $100k equipment over the summer. You deduct the entire thing at year’s end. At a 35% tax rate, that’s $35k off your taxes – that’s real money that stays in your bank account. From summer to the end of the year, let’s say you pay approximately $12k in finance payments for this equipment. So, you saved $35k in taxes, and paid out $12k in payments. Your net saved is $23k. That means the equipment technically cost you nothing this year.
“Plus, it made your bank account $23k larger. AND you got to use the equipment to hopefully make more revenue. Yes, this is real… It’s simply the best tax deduction imaginable, and it’s one every business should use every year,” says Fletch.
Getting used
As supply chain issues are wreaking havoc across the board, it’s been a boon to the used equipment market.
“Used ‘everything’ is hot right now,” Fletch says. “When companies cannot find a new version of a needed piece of equipment, they turn to the used market. In addition, many companies have closed or owners retired during the pandemic, but their machines are fetching solid dollar amounts. Whether sold through dealers, auctions, or private party equipment sales, used equipment is still very robust.”
Fletch points out that despite the “doom and gloom” we hear and read about, many industries are reaching out to him daily to inquire about equipment financing, illustrating just how strong certain manufacturing sectors are performing. And the thankfully for label converters, their industry is one of them.
An in-house leasing program
Label converters can also be thankful for OEMs within the industry that have an in-house equipment leasing program. One such supplier is digital press manufacturer Domino.
Mark Herrtage, finance director at Domino, explains, “The Domino In-House Leasing Program allows customers to pay for their new Domino N610i digital UV inkjet label press over a period of time, typically three to five years with fixed, monthly payments. In the United States it’s called a dollar buyout lease, and in other parts of the world it’s called a finance lease, but effectively it’s a capital purchase with the payments spread over a term. So, at the end of that period, the customer would then take ownership of that press.
“If I were to summarize it, our In-House Leasing Program provides attractive low rates, with fixed monthly payments, no large cash outlay, no personal guarantees required and no banks or third-party leasing companies involved. You’re dealing directly with Domino. We have a Ramp-Up Program with deferred payments – bundled with service, maintenance, training, printheads and Digital Solutions Programs. We also have a future-proof trade-in guarantee. The benefits are endless with this simple, easy, flexible program,” Herrtage says, noting that most customers are utilizing the In-House Leasing Program instead of an upfront capital expenditure to acquire a Domino press.
Patrick Wafer and Ryder Fyrwald, owners and co-CEOs of Cover Label, have taken advantage of the program. The say, “One of the big advantages of the Domino financing program for us is the ability to invest in other things – sales, marketing, and hiring new employees are all the ways that we’re going to grow the business, and with the financing, it allows us to do that. We don’t have the disposable cash to go out and buy one of these machines. So, having a financing option and the ability to pay it down over time, along with really attractive rates, made it pretty much a no-brainer for us.”
Herrtage adds, “At Domino, our customers are our business partners. Our leasing programs are very much geared to all companies, whether that be a small company that needs some financial help from us to large companies that just want to be able to protect their own cash flows or invest in other areas. We’re helping them with that. And one of the nice things with the Domino lease program is it’s also backed by our trade-in guarantee program. If something new is launched and you want to move to that, we will take back the press that you have, and we will just recreate a lease for you. We have a very robust trade-in program.”
Going Digital with REX 
Answering the call for a cost-effective way to enter the digital label market, Xeikon launched its REX program. REX, which stands for “Remanufactured - Ecological - Xeikon Quality” supports printers looking for entry-level, affordable digital production equipment to fulfill their customers’ demands for shorter runs, just-in-time production and customization.
Jeroen Van Bauwel, director of product management at Xeikon, states, ”Xeikon has been offering digital presses into the market for more than 30 years. But often, our customers’ digital business runs faster than their press and after a few years, they already need to re-invest in a faster model. The returned press still has a long lifetime ahead so with our REX program we are remanufacturing these older presses by running them through our factory, implementing all recent updates and upgrading the digital front end to the latest version of our workflow: X-800 6.0. The presses that have gone through the REX program are then offered again into the market at a very attractive investment cost. Through the REX program, we are making our well-known digital presses accessible to converters new to digital, with limited investment budgets. REX stands for Remanufactured, Ecological, Xeikon quality.”
The Xeikon 3030 REX is an entry-level press, which can catapult converters looking to take their first steps into digital immediately into the professional and industrial space. This is a full color digital press with the benefit of opaque white which gives access to health and beauty markets, premium beer and other end-use markets in the label space. The 3030 REX uses Xeikon dry toner technology, certified for food safety, therefore giving access to the significant food label markets. The dry toner is also lightfast allowing converters to address label end-uses requiring durability.
Van Bauwel adds, “The 1200 dpi print resolution ensures converters can also serve the high quality offset label market as well as the flexo quality market. Xeikon’s digital front end, X-800 6.0 is the cherry on the cake, as this can be integrated with existing MIS systems, allow fully automated job preparation and handle complex variable data jobs with ease.
“Beside the benefits of our press technology, a Xeikon investment can be regarded as long term security. When necessary, our presses can be upgraded on-site for speed and width when the business evolves to that need. We believe the Xeikon 3030 REX will stimulate an even faster adoption of digital in the label market. Not forcing converters to make concessions about serving certain markets but addressing 90% of all end-use applications in the label industry. This will be an investment which can grow with their needs over time as their business evolves.”
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