Planning For Your Construction Equipment Finance

Expanding or establishing a construction business can be a daunting prospect. Not only are there building regulations and rules to consider, insurances and administration, but you will also face the prospect of purchasing expensive equipment needed to conduct your business. While there are a number of equipment finance options available, to make the best use of construction or commercial equipment finance, you need to properly plan.

Determining What You Actually Need:

The first step is to determine what you actually need to buy. Will you be considering brand new, refurbished or used equipment? Will you be using some of your capital or need the whole sum covered by finance. Australia based business owners need to consider what equipment they will need to conduct their everyday activities. You should remember that more specialised equipment, you will only need periodically, may be better sourced from an equipment rental company. However, if a piece of equipment is needed for most of your business services, it would be more economical to own or long term lease it.

You will also need to consider if you need any office based equipment such as computer systems needed to optimise your projects and make your operation more efficient. This cost may also need to be factored into your equipment finance.

Different Forms of Equipment Finance:

The specific deal will depend on your particular equipment finance needs. Most lenders offer more flexible terms for finance. This can include longer loan terms and lowered monthly payments with final balloon payments. Obviously, if you are looking for larger items of construction equipment such as plant equipment, there will be more flexibility in the equipment finance terms. Since cash flow is important, you may wish to consider keeping your monthly repayments as low as possible. This will allow you to keep your operating costs low and manageable. You will also be able to budget accurately, since you will know exactly how much you will be paying each month.

Obtain Pre-Approval:

One of the most sensible options for your equipment finance is to obtain pre-approval. This will allow you shop with confidence, making an offer as soon as you see what you need at the right price, without worrying about whether you can actually finance the purchase. Pre-approval for finance can be arranged to a set level to allow you to plan your purchases and obtain the best deals. You can also shop around for refurbished or used equipment to obtain the best possible equipment at the best possible price.

Choosing Your Equipment Finance Provider:

While the prospect of obtaining multiple quotes for your equipment finance may seem a little daunting, it is possible to make the process easier and smoother by using a reputable broker. A broker specialising in construction finance will have a network of providers and access to the best deals. The broker may even have a particular relationship with some of the lenders which allows access to exclusive deals. This allows you to compare the rates and terms available, without needing to spend days on the phone.

Getting the Most Out of Equipment Financing

Establishing or expanding an existing construction business can be an overwhelming experience.
In deciding the proper direction you’ll need to plan out what type of equipment to purchase but more importantly how to pay for it. Are you able to pay cash or will construction equipment financing be necessary? Is it better to buy new equipment or will refurbished or used equipment be a better value.

Unable to pay cash is not unusual and often the need to seek out a construction equipment finance company is the best alternative. In researching equipment financing you’ll want to have a clear understanding of what your company needs in the way of equipment and how your cash flow will allow you to pay for it.

Determine The Type Of Equipment You Need

Your construction equipment finance company will need to know exactly what type of equipment you intend to purchase, as they will tailor the finance terms to match the need. Different types of equipment will have different types of financing. For example, if you plan to upgrade your computer system the finance company may offer shorter term financing as computer equipment becomes obsolete in a short amount of time. The purchase of a bulldozer or cement truck may have a much longer life span and be eligible for longer term financing.

Consider Used Or Refurbished Equipment

Once you decide how much equipment to buy, the brand you want or need, how much your budget can support, etc. you will then need to decide if buying new or used equipment is the best route to follow. Refurbished or used equipment may be an ideal solution, especially if the primary use is to be used as a back up to your existing construction equipment and not put into use on a daily basis. Not all used construction equipment will be reliable enough if you plan on making it your primary equipment. Just as you’d research the pros and cons of purchasing a used car you should perform diligent research on your proposed used equipment purchase.

Not All Financing Companies Are The Same

Now that you know what you want or need and have decided between refurbished or new it’s time to start researching financing companies. A good place to start is the bank that maintains your business checking account. Although they may not offer the most attractive financing options it may offer a good comparison to a company that is a construction equipment finance specialist.

Because it’s all that they do, an equipment financing company will be more knowledgeable than a commercial bank with regards to your specific business and equipment needs. Seek out a company that maintains its own underwriting department since these companies are more able to respond to your request for equipment financing quicker than if they had to send the application out of the department for review. The end result will be you have your financing quicker and delivery of your new equipment will not be delayed due to financing.

If you’re not in a position to purchase new or refurbished equipment another option often offered by equipment financing companies is equipment leasing. This is a great option for a seasonal business, someone just starting out or where tax advantages come into play. If you’re concerned about tying up liquid assets as you establish or expand your current construction equipment fleet, look to a construction equipment finance company. They have the experience and knowledge to help guide you in financial decisions that are right for you.

Getting the Most Out of Equipment Financing

There are many equipment financing companies in the business world anxious to gain a new client who is looking to buy or lease machinery for construction, transportation or the office. Consumers need to be cautious and be sure they are getting the best deal for their needs and that they are working with a proven company.

One of the first things to consider is the reliability of the equipment financing organization. There will be several in the client’s location who have been in business for many years and who are well established. They should be happy to supply names of customers who will give a testimonial of their satisfaction. The company should have a comprehensive website where rates can be computed and full disclosure of the merits of leasing versus buying is discussed. And sales associates, when contacted, should be patient and helpful, answering questions fully without pressuring the client to make a decision.

Potential clients should also ask the equipment financing company if it will consider used equipment, as huge savings can be realized if pre-owned machinery is purchased. And it is also important to find out what the timeframe for approval is. Many financers can offer a one-day turnaround, making for a quick and efficient process, since if the price is good, the unit may not be available for long.

In addition to the company from which the equipment is being purchased, there are many institutions which offer equipment financing. Conventional banks usually offer the lowest available interest rates, and clients who have a good relationship with their bank and who use it regularly for doing their business as well as investments, may get a very good deal. Banks tend to be territorial, however, and may not be open to financing equipment that is going to be used to expand a business to another city. Other options for equipment financing include independent borrowers, where the interest rate may be higher, but they are often more flexible.

Whether to purchase or lease is another factor which should be contemplated before signing any agreement for equipment financing. Often a lease is very reasonable on a monthly basis, but once its term is up, the ownership does not belong to the lessee; there is a residual buyout which must be purchased. This most often applies to vehicles, but may also be in effect for other equipment. The worst case would be paying for equipment long after the need for it has passed, so buyers would be wise to examine any agreement carefully and be sure they are aware of all the terms. Leasing does allow the consumer to trade up to the latest technology easily and this is a positive reason to consider it.

Most large machinery and equipment, including construction, automobiles, semi-tractor units or airplanes, is purchased by using the services of an equipment financing service. There is a considerable capital outlay when purchasing semi-trailer units or aircraft as well as road construction pieces, and few companies can or want to pay cash. Leasing it rather than owning it is a very common practice that often makes good business sense.