One of the biggest concerns for any construction company is how to afford the equipment it needs to complete projects. Luckily, there are three effective equipment, equipment loans, leasing, and SBA loans. Here is a quick guide to equipment financing.
Method 1: Equipment Loans
One of the easiest options for a construction company is an equipment loan. Equipment loans are attractive because, on receipt of repayment, the company can keep the equipment. This equipment can be used as equity toward more equipment or in continued use. However, the lender will likely require a down payment. If you fail to meet the loan’s payment terms, the lender will take back ownership of the equipment.
Method 2: Equipment Leasing
Equipment leasing works much like renting an apartment or leasing a car. The construction company will not own the equipment and so it does not build equity. However, you update your equipment at the end of the lease, and there will be no down payment required. Additionally, some agreements have an option to purchase the equipment once the lease ends.
Method 3: Small Business Loans
Small business loans are another option for companies that need to purchase equipment. For instance, the Small Business Administration helps businesses link up with lenders that can provide funding for fixed assets, such as equipment. If you go this route, try for a loan that has the lowest interest rate possible, and ensure that the loan’s term is no longer than the projected useful life of the equipment. (Preferably, it will be shorter.)
Contact Avery James for assistance with equipment financing.