Financing the acquisition of construction equipment instead of spending cash may provide significant advantages while minimizing risks. Furthermore, how you finance should be the outcome of cautious planning based upon multiple factors.
Here are things to take note of when seeking financing for your construction equipment:
Luckily, financing solutions provided by equipment finance firms are typically tailored depending on your specific accounting, tax or cash flow requirements. They practically run the gamut, offering a whole variety of financial products.
Capital preservation is a big factor when businesses consider financing. Investing in significant capital expenditures usually entails serious financial risk, particularly for less stable companies. Financing rather than spending cash, and the exact type of financing used (lease or loan) can help minimize the uncertainty of a capital asset investment that may not yield the promised return. Lease payments, for example, can usually be tailored according to the equipment’s usefulness.
Better Expense Planning
Maintaining a positive cash flow and regular budgeting is another critical point of consideration when getting equipment financing. Instead of sizable capital outlays leading to significant budget fluctuations, financing makes even cost planning viable. Tax considerations are important too. With full payout leases or equipment loans, the borrower can take depreciation on the acquired equipment, whereas an operating or FMV lease allows the borrower to pay smaller installments sans 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
When it comes to equipment lease financing, flexibility is key. 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.
Using the latest equipment is a must for business nowadays. 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. Yet again, the route to successful construction equipment financing is to do your research in order to learn more about potential solutions. The only way of empowering you enough to make the best decision is by looking for information now.
Definitely, you should know more about this company from which you would like to obtain financing, including their customer service record. These are things that you should not underestimate or take for granted. Sometimes, this is as simple as digging into each page on their website instead of just their homepage.