Finding the right equipment financing solution for funding your heavy equipment is very important to keep your operations on the go while you are into the construction business.
Heavy equipment is critical to success, and yet the cost can brutally affect you in the construction business, even when speaking about the caterpillar. To fund the purchase, you need to find the right caterpillar financing unless your budget can spare the cash.
Where do you look for equipment financing?
From the banks, credit unions, equipment manufacturing companies, and supply companies, as well as other independent and online lenders, is from where you can obtain the construction equipment financing. You can choose from the three main equipment financing options:
- Equipment leasing
- Equipment loans
- Small business loans
You will have to have an assessment done on the kind of construction equipment you will require before you choose a financing source and option. You need to determine the type of machinery, vehicles, or other equipment that you wish to have financed. Decide on whether you need to build something that will last as you want to have the newest equipment updated regularly. It would help if you also decided on which of these three equipment-financing options will be the best for you once you have determined all of your needs.
- Equipment leasing
You can save a lot of money and have the benefit of getting the most up-to-date equipment by leasing equipment. You can quickly expect to have lower monthly payments that you would have with equipment or business loan. To get started, you will also not have to place down a down payment on the equipment type.
You can quickly negotiate on the terms more easily as leasing is more flexible than a loan. You might be able to purchase the equipment at a much-reduced price, for instance. You can always return the equipment if you find that you do not need the equipment any longer. You will not be stuck in making the payments onto something that you no longer need as you will have to pay an early termination fee.
Leasing does not provide a depreciation tax benefit as your rental payment will be tax-deductible. You also will not be building equity as you are making the payments as the interest rates tend to be higher than equipment or small business loans.
- Equipment loan
You own the equipment from day one with an equipment loan. Once you are repaying the loan, your equipment can be used as equity towards a new piece of equipment, and this is a lot more similar to a car. For cash, at the end of the loan, you may be able to arrange a sale-and-leaseback agreement in which you are selling your equipment to your finance company, and after which, you are leasing the equipment from the lender.
Since the credit standards are less strict and rely on the other factors such as the experience with equipment when it comes to an equipment loan, which is easier to get than a small business loan, a lender can always get the equipment back to lend or resell since the equipment has inherent collateral. You can enjoy a tax-deductible on interest and a depreciation tax benefit over time as there are tax advantages to own the equipment too.
Before you are receiving equipment, the equipment lenders will require a down payment. You might also be able to avoid imposing much money down first, depending on your assets or equity. The bank will be making use of those assets as collaterals and shoulder the entire burden of financing without requiring a down payment if you have enough assets. Your assets may be seized in the event of loan default.
- Small business loan
You can pay for the equipment as well with small business loans. The term of the loan should be less than the expected lifespan of the equipment, or the term of the loan should be matching. You need not start paying off for the equipment longer than what you are using it for.
You might have to take out very large loans to fund a purchase as construction equipment is very expensive and necessary for the industry, this led to the growing demand of caterpillar financing option as this can help deplete your ability to borrow money in times when you have other business funding that is required.
You should need to consider the type of maintenance is required by the equipment will have before you choose financing option for an equipment for your construction business. While the others won’t, some equipment leases may offer to service in case of breakdowns or other malfunctions. Purchasing equipment could be your best option if you are willing to pay someone else to fix equipment or if you can do it yourself.