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How Lehigh Valley Manufacturers Can Save on Construction and Equipment Purchases

Posted by Andrea Brady on Tue, Mar 7, 2017

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mfg emblem-TAX BENEFITS copy.pngWhile purchasing new equipment – or on a grander scale, a new facility – is generally a positive indicator for a manufacturer, it’s also a costly endeavor.

It requires significant cash reserves, either to buy the equipment in the case of more minor purchases or to secure bank loans for larger purchases.

But those don’t have to be your only two options. For Lehigh Valley manufacturers, there is a wide variety of low-interest loans and tax-exempt financing for construction, renovation and equipment purchases.

For manufacturers both in the Lehigh Valley and across the country, there are also tax strategies available to recoup some of your equipment and construction costs.

Tax Strategies

Section 179 Depreciation for Equipment Purchases: You may be able to immediately write-off any equipment purchases up to $500,000. Congress recently made this tax benefit permanent, allowing for far greater tax planning.

Bonus Depreciation for Equipment Purchases: This is for new equipment only (Section 179 can be for new or used), but it can add up to big savings. Bonus Depreciation allows you to write-off 50 percent of the asset cost in the first year, and then you can depreciate the other 50 percent over five-to-seven years. This benefit will be reduced to 40 percent in 2018 and to 30 percent in 2019.

Cost Segregation Depreciation: Did you incur costs during the building and construction or purchase of your facility? You can likely accelerate some deductions with a cost segregation study, an engineering-based analysis of the costs associated with the acquisition, construction, or renovation of a building.

READ MORE: Adding to Your Workforce? Check Out These Grants, Tax Credits Available for Job Creation

Construction, Renovation and Equipment Funding

Pennsylvania Machinery and Equipment Loan Funds: These low-interest loans can be used for new or upgraded machinery. The Lehigh Valley Economic Development Corp. (LVEDC) can assist in obtaining this funding and a dozen other low-to-market rate loans from the state that can be used for equipment, construction, renovation or working capital.

Pennsylvania Industrial Development Authority Low-Interest Loans: PIDA offers low-interest loans and lines of credit for eligible businesses that commit to creating and retaining full-time jobs and for the development of industrial parks and multi-tenant facilities. The funding can be used for land and building acquisitions, construction and renovation costs, machinery and equipment purchases and working capital and accounts receivable lines of credit.

Both LVEDC and the Governor’s Action Team can assist local manufacturers in obtaining PIDA funds.

U.S. Low-Interest Loans: Both the U.S. Small Business Administration and the U.S. Department of Agriculture offer low-interest loans to manufacturers that can be used for machinery, equipment and working capital. These loans are commonly used for start-up and small expansion projects.

Lehigh and Northampton County Tax-Exempt Financing: LVEDC oversees both the Lehigh and Northampton County Industrial Development Authorities, both which are focused on assisting manufacturers. The chief financial benefit the authorities provide is tax-exempt financing, which can sometimes provide lower interest rates than those offered by banks.

Lehigh Valley Manufacturers' Guide for GrowthNorthampton County Low-Interest Loans and Tax-Exempt Financing: Northampton County offers low-interest loans and tax-exempt financing to help boost business growth in the county. The county’s business financing programs include:

Economic Reinvestment Loan Program: These low-interest loans are intended to help support the creation and retention of jobs through business preservation and expansion. The loan has a $250,000 maximum and can be used for machinery or equipment purchases or building renovations, expansion or purchase.

Business Boost Loan Program: These low-interest loans are intended to serve as gap financing in conjunction with conventional financing. The loan has a $150,000 maximum and can be used for operating capital, machinery or equipment purchases or building renovations, expansion or purchase.

The Northampton County General Purpose Authority also offers two business financing programs:

Tax-Exempt Bond Financing: The authority offers tax-exempt bond financing, which is available to manufacturers. Available amounts vary based on qualifications; the money can be used for used for machinery or equipment purchases or building renovations, expansion or purchase or refinancing.

Loan and Development Fund: These low-interest loans are available to provide financial assistance to incentivize community development in Northampton County. The loan has a $100,000 maximum and can be used for job training in addition to machinery or equipment purchases or building renovations, expansion or purchase.

How to Apply

Concannon Miller is personally acquainted with the key personnel at these organizations and can help you navigate with various agencies and programs to determine the route for maximizing your opportunities to get your business on the path for greater success. Many of these organizations provide manufacturers with free or discounted assistance. Contact us here for more information.

Looking for more grant and tax credit opportunities? Check out our Lehigh Valley Manufacturers’ Guide for Growth, which offers details on more than 30 tax strategies, grants, credits, low-interest loans and other business resources to help manufacturers grow. Download your copy here.

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Topics: Manufacturing

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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