7 Issues to Consider Before Financing Construction Equipment

 

Most construction businesses and equipment rental companies in California know about equipment leasing and financing but may not be familiar with the kinds of specific information they need to make the ideal financing decisions for their investments in equipment or software. Realizing the methods in which leasing fits your company’s certain needs can facilitate building a substantial business case for financing as well as ascertain which financing option to select. This decision necessitates a careful assessment of your financial, operational and other situational needs, apart from the knowledge of the many benefits leasing provides.  

The following is a checklist of important issues to consider when making decisions about quality equipment rental. 

 

 

1. Purchase or Lease  

 

At the outset, the most crucial thing to know before financing equipment is that leasing is normally more beneficial for your business instead of directly purchasing equipment. Equipment finance industry research established that 55 per cent of the projected $1.3 trillion total U.S. investment in equipment and software, or $725 billion, is expected to be financed. The latest research available shows that 72 per cent of firms used at least one form of financing.  

 

2. Cash Flow/Budget Necessities 

 

According to the provider of best rental equipment in California, financed equipment can generate revenue for your business that far exceeds the cost of your monthly payment. Financing also allows you to stretch your budget to get extra equipment you couldn't have afforded otherwise as it’s more convenient for most businesses to make a monthly payment instead of making a large lump sum cash outlay. Moreover, 100 per cent financing is available so that no down payment is needed. 

 

3. Capital Expenditure Plans 

 

Most businesses, especially in this present economic situation, have decreased or restricted budgets for business investment. If your company is like the majority of those facing unlimited wants and limited resources, leasing equipment lets capital budgets be utilized for other business and operational purposes. 

 

4. Risk of Equipment Obsolescence 

 

Technology upgrades and innovations develop fast. Possibilities are that the software and equipment you bought two years back are already backdated. Financing offers a hedge against equipment obsolescence through options to either buy the equipment, trade it in for new equipment or return it straightaway at the end of the lease term. Taking advantage of options to avoid obsolescence is important to maintain a competitive edge. 

 

5. Credit Availability 

 

Access to credit is an important driver of business growth. Financing equipment preserves your lines of credit and allows you to save your bank borrowing capacity. Important considerations to accommodate both planned and unforeseen future business expenditures your company may incur. Financing also has one-day credit approvals, whereas banks can take days or even weeks. This speed of access to equipment is another strategic benefit for your market position. 

 

6. Tax Benefits 

 

Tax code provisions continue to provide incentives for businesses to invest in equipment. Check the IRS Section 179 Deduction threshold for the total amount of equipment that can be purchased and how much you can deduct of equipment cost. 

 

7. Standard finance plans 

 

With a clearer picture of the position of your business and equipment that needs to be figured out from this checklist, you can consider the type of finance plan for the equipment you are acquiring. Following is some of the most commonly selected ones. 

• Fair Market Value  

• 10% Security Deposit 

• 10% Purchase Option  

• $1.00 Buy-Out  

This summary of topics to consider is crucial for the equipment financing decision-making process.  Getting in touch with a full-service equipment financing company that can help you address these issues and answer your queries will help ensure that you get the right equipment at the best possible terms for your business.