How to Get Equipment Financing for your Construction Company
When starting a construction business, having the right tools and equipment plays an important role in defining the success of your company, and most of all it keeps the operations to be efficient and safe. It is really an advantage to your company if you have all the heavy and up to date equipment because this will help you win a bid and land for the job. As you already know, the construction business is a very competitive industry but there’s a lot of opportunities that can expand your business.
So, it is really important to take into consideration what kinds of equipment and tools you are going to need in your company and how you are going to get it, especially that the cost of the construction equipment is expensive and relatively high which is impossible for you to pay up front. When there's a need to upgrade or replace construction equipment, consider different options whether to lease or purchase new equipment. Here’s the list of equipment-financing options that will be best for you. 1. Leasing
By leasing construction equipment, you can save money by not having to pay for the most up-to-date equipment. You can get a lower monthly fee than you would with an equipment or business loan. You also won’t need to pay for a down payment on the equipment to get started.
Leasing is more flexible compared to a loan, and most of the time the terms are more easily negotiable. If in the future, the equipment is no longer useful, you can easily give it up and return the equipment as long as you pay for the termination fee. For instance, you want the equipment; you may be able to purchase the equipment at a reduced price.
2. Equipment Loan
If you choose an equipment loan, you own the equipment by the start of acquiring it. It’s the same with a car, once you repay the loan, the equipment can be utilized as equity for a new equipment. When the loan is paid, you may be able to lay out a sale-and-leaseback agreement in which you can have the equipment for sale to your funder for cash, then have the option to lease the equipment to a lender.
It is easier to get an equipment loan than a business loan since credit scores are less required and mostly rely on other factors, such as experience with handling equipment. Another good point is, it’s an inherent collateral, a lender can always have the choice to get the equipment back to lend or resell. Apart from that, there are tax advantages to owning equipment too—you can enjoy a tax deductible on interest and a depreciation tax benefit over a period of time.
Usually, equipment lenders will require a down payment before you will have the equipment. However, it also depends on your assets or equity, you may be able to avoid putting a lot of money on the first hand. If you have enough assets, the bank will use those assets as collateral to shoulder the whole burden of financing without requiring a down payment. This means, if you're not able to pay for your loan your assets may be seized. 3. Small business loan
You can also use a small business loan in acquiring construction equipment. The term of the loan should match the lifespan of the equipment because you don’t want to be paying off the equipment longer than you’re able to use it.
If you choose for a small business loan, check for the lowest annual percentage rates (APR). If your credit score is less than optimal, your best choice will be with an online small business loan provider. Loans found online will be easier to obtain and since construction equipment is so expensive but necessary for the industry, you may have to take out very large loans to fund your equipment.
After considering all the options, it is also important to know where to get those funding available for you. You may want to visit SALS CAPITAL or call at 332-334-1077 to consult with their own funding manager and give you the product your specific business needs.