The Advantages of Construction Equipment Financing for your Business
Due to the nature of the construction business, there are many types of equipment needed to operate successfully. Businesses often make investments ranging from heavy grade machinery to state-of-the-art computer technology. Determining what type of equipment financing best serves the company’s needs is often a critical part of the investment process.
For many companies, financing acquisitions rather than depleting precious cash reserves can provide significant benefits. Business owners should evaluate their circumstances before making decisions on how to fund major purchases by evaluating cash flow, current and future credit obligations, tax consequences and the expected useful life of the equipment.
By electing to finance large purchases, businesses may preserve capital to take advantage of future opportunities. They may also pay down the debt more quickly should they experience larger than expected cash flow. Depending on the type of equipment financing, the obligation may be recorded either as an ongoing expense or a long-term debt, which can impact eligibility for future bank loans or lines of credit.
Predicting future payment streams is an important part of business planning. By financing equipment, it may be easier for the company to manage future payments and how they impact the company’s cash position, particularly for seasonal businesses. Certain types of financing may allow linking repayment levels to the revenues generated by the equipment. It may also be possible to negotiate payments based on changes in projected cash flow due to industry business cycles.
Equipment financing companies may be able to offer expertise when evaluating and purchasing new machinery. By employing the latest technology, the time needed to complete complex jobs and their associated costs may be reduced, allowing for higher profit margins and the capacity to take on additional business. Financing may give smaller, specialty companies the option for purchasing cutting-edge equipment to compete with larger organizations who more often have access to the newest technology.
By working with specialty financiers, construction companies may be better able to manage the obsolescence of their equipment over time, planning for future purchases and upgrades as technology and expectations change in the marketplace. Financing companies may be able to assist businesses with managing assets throughout their lifecycle including installation, ongoing maintenance, disposition and upgrading to newer equipment in the future.
Understanding the benefits of construction equipment financing options can help business owners make the best decision for funding machinery and technology purchases. Keeping equipment well-maintained and up-to-date, combined with understanding cash flow and tax implications, can lead to future opportunities and business success.