Tips For Financing Construction Equipment

Construction equipment like crushers, cranes, bulldozers and backhoes are vital for efficient and effective construction. Sometimes this equipment is also referred to as heavy machinery and engineering vehicles. Unfortunately, the restrictive price tags that are attached to these pieces of equipment present an obvious deterrent to the acquisition of this important equipment. Like most ventures, one of the greatest tips for financing construction equipment is planning ahead. The investor must accurately determine the equipment needed. Cost benefit analysis is part of this planning. A building is a resource-intensive investment that may take anything from months to decades to yield the intended benefit.

Fortunately, there are a number of basic methods for financing construction equipment. The first, an outright purchase, is an option applicable to large corporations and leading brands. There are also tips applicable to purchase. Going for discount equipment is the best. Discounts vary with manufacturer policies and procedures. The Internet is rich in such options. The savings trickle directly to the buyer. As a mark of goodwill, a few of these companies ship equipment at no extra cost.

If you don’t have a large reserve of cash readily available, renting or leasing become the most viable options for financing construction equipment. Equally so, it is unwise to buy construction equipment for short-term use. The difference between leasing and renting is that in the former, the leaser uses the equipment for a number of years before renewing the lease or returning it. Ownership is temporarily transferred. With rent, the user pays rates every so often for use of the equipment. Why pay millions of dollars for equipment that will be used for less than a month? Renting lets the user pay only for what they use. Most companies take care of the logistics, maintenance and other housekeeping activities, letting the design team concentrate on the job at hand.

In all cases, considering refurbished or used equipment significantly brings down the cost. If it backs up existing equipment and is not required for daily use, the benefits of this option become clearer. Many financing companies readily give advice to customers and even connect them to financiers.

Most financial experts prefer that investors opt for equity instead of bank loans. This ranks among the greatest tips for financing construction equipment as it keeps the investor in charge of the finances and reduces the payback period leading to faster recouping of investments. With ballooning interest rates, loans may ultimately result in losses for several years to come. These losses need to be taken into consideration when paying back the loans established for the construction equipment.

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.