How To Finance Construction Equipment
Building new commercial developments can be a lucrative enterprise, especially if you have the working capital to take on multi-building projects. It can also be a great way to contribute to the ongoing growth of your local economy. Unfortunately, growing in this industry can be difficult, because often new pieces of construction equipment are extremely expensive, so the size of your projects might be limited by the range of your tools. When that happens, though, there are financing options to help you gain access to the machines you need for more ambitious contracts. The first question when figuring out which financing methods to pursue is whether you want to own the machines or not because there are both loans and leases to consider.
Loans for Equipment Purchasing
Financing heavy equipment with an eye on ownership tends to be a good choice when you’re investing in construction equipment you’re going to use for a long time, like the core pieces you need to excavate and to move raw materials around. Loans designed to help you make the purchase will most likely be secured with the assets themselves as the collateral, and lenders offer a range of repayment terms. Opting for a longer repayment term can help you minimize your monthly overhead to get a return from the investment faster, but shorter terms often come with advantageous interest rates. Choose the option that fits your needs now. After that, you’ll need financial statements, an application from the lender, and a business plan that includes projections for the possible earnings increase from your new construction equipment.
Leasing as an Equipment Financing Option
If you need equipment soon and you can’t afford the down payment for a purchase, leasing can get it into your hands so you can gain the advantage of having it for your project. It’s also the most cost-effective option for short-term equipment needs, machines that have a short operational life before obsolescence, or for when you’re controlling your company’s debt commitments. Leasing can also provide you with some tax advantages under the right circumstances. While you won’t achieve full ownership and stop making payments, you also won’t have to worry about equipment removal when you want to upgrade. If you do decide to purchase the machines later, many leasing agreements have an option to buy instead of renewing as well. If that’s something you’re interested in, make sure you speak up when inquiring about financing construction equipment.