What to Consider When Seeking Construction Equipment Financing
Financing the purchase of construction equipment instead of using cash offer substantial benefits while reducing risks. More importantly, the way you finance must be the result of meticulous planning based upon several factors.
Below are things to remember when finding financing for your construction equipment:
Fortunately, equipment finance companies offer highly flexible solutions that are patterned along particular tax, cash flow or accounting needs. They offer nearly every loan you can think of that is suitable for your need.
Capital preservation is a big factor when businesses consider financing. Investing in huge capital expenditures typically represents larger financial risks, specifically for smaller companies. Financing against spending cash, and the exact financing type used(lease vs. Lease payments, for example, can usually be tailored according to the equipment’s usefulness.
Maintaining a healthy cash flow and consistent budgeting is another important consideration when planning equipment financing. Instead of sizable capital outlays leading to significant budget fluctuations, financing makes even cost planning viable. Tax considerations are necessary as well. Full payout leases or equipment loans provide the borrower the option to take depreciation on the equipment acquired; on the other hand, an operating or FMV lease permits the same to pay in smaller amounts with zero depreciation. With a loan, you can lock in your payments for the asset’s anticipated life, but with a lease, there is less expense for the determined time of use.
Flexibility of Business Cycle
Flexibility is a main issue in terms of equipment lease financing. There are leases that permit occasional business fluctuations and decrease monthly payments as a project builds up and as revenue from the equipment or your business’ general situation is still inadequate or unstable. Some leases allow business fluctuations from time to time and reduced monthly payments as a project ramps up while profits generated from the equipment or the total situation of your business is still insufficient or shaky. In certain cases, occasional business fluctuations may be allowed and monthly payments may be lowered while a project tries to gain momentum and your business’ overall situation or gains from the equipment is still volatile or not enough.
Having the latest equipment is crucial in the business environment today. The problem though is that for many businesses, especially those in the construction industry, buying equipment outright is too risky, if not totally impossible. By funding their acquisitions via term financing, they are usually able to purchase more and better equipment that could have been totally out of their league otherwise. Again, the key to successful construction equipment financing is to research and discover more about available options. There is nothing that can help you in making a smart decision but more info.
Certainly, you must check the background of the financing company that you’re considering, including the quality of their customer service. Don’t ever take such issues for granted. Sometimes, this is as simple as digging into each page on their website instead of just their homepage.