Have you invested in the construction sector? If so, you may have realized that construction equipment is expensive. Now the question arises as to which one is most suitable Tips for financing the heavy equipment intended for your construction business.
How to Get Equipment Funding
You can get the funds you need from credit unions, banks, suppliers, and equipment manufacturers. The main financing options for heavy equipment currently available are:
- Equipment loan
- Equipment leasing
- Small Business Loans
Before deciding on financing, you should first check what type of construction equipment you need. First of all, what kind of vehicles, machines and other construction equipment are you financing? Do the devices need to be updated regularly or are you looking for something that will last a long time? After you have identified all of your needs, you can then decide on the financing options that work best for you.
If you opt for a device loan, you will definitely own the devices after the purchase process. After the loan has been repaid, you can even use the equipment as equity if you want to purchase other equipment. You can also get a leaseback agreement that allows the finance company to purchase the equipment you own.
Getting an equipment loan is easy compared to small business loans because the regulations are less risky and various factors are taken into account, including equipment experience. Since the equipment can be used as collateral, the lenders and equipment will be returned and resold to the lenders, some tax benefits are also in place, and you will enjoy the tax deductions.
Equipment rental companies require a deposit before you receive the equipment. Still, depending on your wealth, you can avoid spending a huge amount of money as a deposit. If you have assets, you can use them as collateral and you won’t need a deposit in that case. This means that in the event of late payment, the assets will be confiscated and resold to meet the equipment credit.
Leasing construction equipment can save you a lot of money. You will also be using the latest form of equipment. The monthly rates are lower than when applying for a business loan. In this case you do not need to pay a deposit.
Leasing is better because it offers more flexibility compared to a loan. It’s also easy to negotiate the terms. For example, if you need to end the lease and prefer to keep the equipment, you can get everything at a reduced price. There’s a cancellation fee as well, but you won’t be stuck with payments for the devices you don’t need.
The rental payment is tax deductible. There are no depreciation tax benefits with leasing. The interest rates will also be higher than the small loans, and you won’t build up your equity while you make payments.
Small Business Loans
You can apply for a small business loan to purchase the construction equipment. Conditions should match the life of the construction equipment you plan to buy. You no longer have to pay for devices that you no longer need.
When applying for a small business loan, you should look for the best terms. Make sure that the credit unions and banks have issued the best interest rates too; However, if you are to qualify for a loan, your credit rating should be good. If your credit rating is not that good, the best option is to contact online small business lender. Online loans are easily available; However, the interest rates are high compared to traditional lenders.
Since construction machinery is expensive, you need to apply for a large loan. The main problem is that when you need more cash to fund other errands, your ability to apply for another loan will be affected.
Before choosing any of the financing options listed in this article, consider how the equipment will be maintained. With the leasing option, maintenance can be offered if the device fails; If you’re willing to pay for maintenance yourself, it’s best to get your own equipment.
By Abby Drexler, BOSS employee