Construction equipment is expensive. In order to provide your customers with all of the services they need, it’s critical you possess the tools you need to get the job done. As a contractor, that means purchasing the best equipment for your contracts that will ensure you do a top-notch job and complete the project on time.
Purchasing new, updated equipment is costly. That’s why it’s important to set up a financing plan to manage your costs effectively. Equipment financing is one way to cover expenses for your equipment purchases.
In this article, we are going to go review the difference between equipment leasing and equipment loans and discuss how equipment financing can help your construction company in numerous ways.
Equipment Leases for Contractors
Equipment leasing is a great option for construction companies. Sometimes you only need certain equipment for specific jobs. With an equipment leasing plan, you basically rent the equipment from a lender. At the end of your lease, you can either return the equipment, extend the lease, or purchase the equipment outright from the lender.
With an equipment lease, you borrow the equipment you need for your construction contracts and pay monthly payments. Your payment goes either directly to the equipment company or to their third-party financial company that handles their lease payments. You never see the money, and you don’t own the equipment unless you buy it from the lender at the end of the lease term.
An equipment lease is ideal for construction companies that are doing a special job for a project. Sometimes that one special job needs a unique, expensive piece of equipment. Upon completion of the project, you might never need it again. It doesn’t make much financial sense to purchase that particular piece of equipment outright.
By setting up an equipment lease, you can borrow the equipment you need and make monthly, tax deductible payments. That means you get the tools you need, when you need them, and then move on to the next job.
Equipment Loans for Contractors
Equipment loans are similar to traditional loans and comes with one restriction that the money must be used on equipment purchases. Instead of getting a lump sum of money, the lender pays for the entire cost of the equipment you need, and you in turn make monthly payments according to the particulars of your loan agreement.
Different lenders offer different interest rates and repayment options. Like any financial decision, it’s important to consider the alternatives. Best to shop around and find the right loan that covers your equipment needs and budget.
Equipment loans are beneficial for construction companies because it saves you from the burden of making large purchases that can deplete your cash reserves. By spreading out the payments over the term of a loan, you can free up working capital for your other operating expenses.
Benefits of Equipment Financing for Contractors
Equipment financing is perfect for construction companies. Different jobs require different equipment, but purchasing specific pieces equipment isn’t practicable or cost efficient. On the other hand, with equipment financing, you get the tools you need when you need them all without tapping into your cash reserves.
The biggest benefit of equipment financing is the flexibility it offers you. Instead of spending huge chunks of money on expensive equipment purchases, you set up an equipment financing plan that preserves your working capital. This allows you to always have the tools you need without depleting your cash reserves, allowing you to maintain a back-up in case of an unexpected emergency..
Your construction company needs to have the best equipment in order to get the contracts you need. If you want your clients to keep coming back, it’s necessary you offer them the services they want. Equipment financing is one, relatively quick, option for covering the equipment costs that does exactly that for you.