Top 3 Equipment Financing Options
Running a construction company requires investing in plenty of heavy equipment, including bulldozers, backhoes, and excavators. While you can’t complete a contract without these machines, they’re all expensive and liable to breakdowns given the high-impact nature of your work. When you need new equipment but don’t have room in your budget to purchase it outright, try one of these three equipment financing options.
- Take Out Equipment Loans
Equipment loans work similarly to loans for cars and other major purchases. You apply for a loan through a traditional bank or a special equipment lender, and once you’re approved, you receive the money you need to buy your machine. Unlike other kinds of financing, you immediately own machinery purchased with equipment loans. When you apply, find out whether the lender expects a down payment and, if so, how much you need to save. Additionally, watch out for interest rates and fees that drive up your equipment’s cost. Benefits of this kind of financing include tax deductions, more relaxed credit score requirements, and quicker applications.
- Apply for Small Business Loans
If equipment loans aren’t right for you, consider applying for small business loans. Traditional banks, online lenders, and companies affiliated with the Small Business Administration cover this type of equipment financing. As you consider different providers, check each loan’s term. Some companies offer payment plans that last for longer than your machines are expected to last, which is not ideal. As with equipment loans, be careful of interest rates, especially those from online lenders. Still, if you don’t have a great credit score, you may need to settle for high annual percentage rates.
- Engage in Equipment Leasing
Some business owners are leery of all types of loans, and so they prefer equipment leasing. This option allows you to rent machines for a set period, with the option of buying the equipment when the lease expires. Most lease plans involve monthly payments that are tax-deductible but do not require down payments. While your payments don’t affect your credit score, you also have to work with higher interest rates. Still, most equipment leasers are more willing to work with your company’s needs, and you don’t have to make the same commitment as you do when you purchase machines.
Getting the equipment you need for your construction company is a complicated process. Thankfully, you have lots of options for equipment financing; choose the one that works best for you.