What to Consider When Seeking Construction Equipment Financing
Financing the acquisition of construction equipment instead of spending cash may provide significant advantages while minimizing 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 an advantage that drives most businesses into financing. Investing in huge capital expenditures typically represents larger financial risks, specifically for smaller companies. Financing instead of spending cash, and the very type of financing involved (whether loan or lease), can help lessen the risk of a capital asset investment that may not bring the expected return. Lease payments, for instance, can typically be adjusted to the level of productivity produced by the equipment.
Better Expense Planning
Maintaining a positive cash flow and regular budgeting is another critical point of consideration when getting equipment financing. Rather than significant capital outlays creating substantial budget fluctuations, financing allows even expense planning. Tax considerations are important too. 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. A loan gives you the option to fix your payments for the foreseeable life of the asset, but a lease is less expensive for the predicted time of use.
Flexibility of Business Cycle
Flexibility is a key part 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. Through financing, they can purchase more and better equipment that otherwise could have been absolutely out of their reach. Yet again, the route to successful construction equipment financing is to do your research in order to learn more about potential solutions. There is no other way to prepare yourself for a wise decision but through valuable 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. A great way to begin is to search for their website and check it out!