Construction companies understand the importance of heavy equipment. Workers cannot complete their jobs without this equipment. When a company has the right equipment, it can finish projects on time and lower costs. Customers will be satisfied, which will lead to repeat business.
However, heavy equipment comes with a hefty price tag. Small business owners, in particular, struggle to pay for this machinery. They may rely on a compact excavator rental or other rental units until they can afford to purchase their own. Fortunately, construction equipment financing for new business owners is available if one knows where to look.
Qualifying for Heavy Equipment Loans
Business owners often wonder if they will qualify for a heavy equipment loan. They recognize they must meet certain standards before a lender will provide the funds for this purchase. What do lenders look for when making this decision?
Lenders look at an applicant’s credit score and their time in business. Business revenues are considered, and the lender will look to see if the borrower has a down payment and how much this down payment is. Most lenders are flexible regarding construction business loans, but a person will pay more if they have poor credit or a smaller down payment. Interest rates are higher for those with a low credit score, and a lower down payment means higher monthly payments.
Individuals with bad credit may be approved for a heavy equipment loan. The lender knows that the equipment collateralizes the loan, so they take on less risk when lending funds for this purpose. A person with bad credit can increase the odds of being improved by having a larger down payment or a strong revenue stream
Leasing Rather Than Buying
Business owners may also consider leasing heavy equipment rather than buying it outright. A lease is simply a long-term rental. The owner pays a specified monthly amount to rent and use the equipment in their business. When the lease ends, they return the equipment or buy it outright. The pros and cons of each option should be considered before making this decision.
Choosing a Loan
Business owners should shop around for a loan rather than go with the first company that offers them the needed funds. When shopping around, they need to consider how much the lender will allow them to finance, the down payment required, and the terms and conditions of the loan. When reviewing these terms and conditions, consider the repayment term, the interest rate, and the funding speed.
Applying for a Loan
Potential borrowers need to gather information from lenders. They will need a driver’s license or other proof of identity, voided business checks, and financial statements. These financial statements might include recent bank statements, tax returns, and a quote for the equipment to be purchased. The lender may also have other requirements, so a borrower should speak to each lender to learn what they request when a person applies for a heavy equipment loan.
Tax Benefits
Purchasing heavy equipment comes with tax benefits. The business can write off interest or lease payments on its tax return as they are considered business expenses. Depreciation may also be written off on taxes. The business owner should speak with a tax professional to learn which items they can deduct from their taxes and save on their liability.
Today, business owners have many options when they need heavy equipment. They may rent this equipment if they only need it for one job. If the equipment can be used on multiple job sites, leasing or purchasing it outright is best. Heavy equipment financing is available, even for those with bad credit. Anyone in the situation should consider all options to find the best one for their unique situation.
