Every business owner deals with many responsibilities. Managing workers, securing clients and customers, to handling the various problems that arise from day to day. All these things cost money. And for construction companies, there’s the issue of equipment in addition to that.
Through our experience, construction equipment can help solve plenty of problems, but construction equipment finance can help a company even more. Since equipment financing allows businesses to use the equipment as collateral, business owners can mitigate the risk if there is any issue with making a payment.
Getting these loans, making payments, and what can and can’t be financed are not always outlined in advance. To help, here are the basics that business owners need to know about construction equipment financing.
The purpose of these loans is to either purchase or lease a new or used piece of equipment to keep the business operational. Construction equipment is a general term but it includes machines that move earth, rocks, and other heavy materials too.
There are multiple reasons for applying for these loans. Generally, it amounts to replacing broken or malfunctioning equipment. That, or a loan purchases an expensive piece of equipment more realistic for a company that lacks the necessary capital.
Furthermore, these loans are handy in cases where a construction company takes on a new project where they need equipment they don’t have. For projects like these, companies lease equipment but a loan can help cover the monthly costs.
There are a wide variety of loans for construction equipment. But for a business owner to get the finance they need, they need to be able to prove the heavy equipment is going to be used for business purposes.
Where financing for equipment becomes trickier is in situations where custom equipment that’s made for a specific project. Banks struggle to place a true value on these pieces of equipment and so they generally don’t finance purchases like that.
Aside from that, the common types they finance are:
Since construction company owners are financing equipment costing tens of thousands to hundreds of thousands, banks are not going to finance these lightly. This is the same case for other types of heavy equipment, such as farming equipment. A business owner will likely need to offer collateral to accept the loan.
As for the cost, most banks will accept the equipment itself as collateral, although some might expect additional upfront payments. It’s advisable to speak with the lender directly about what collateral is appropriate.
Yes. There are several benefits that large and small construction companies can gain from this. Some are:
Construction equipment loans work like business loans, so the qualifications will be similar. To qualify, a business owner will need to:
There is no exact average interest rate. The interest will fluctuate mainly based on the credit score of the applicant. However, there are other determining factors, like:
This is largely lender-dependent. Working with a larger bank in person will take business owners at least a few weeks to receive financing. Online lenders can promise some borrowers next-day financing at the cost of paying higher interest rates.
If the business owner has bad or no credit, it doesn’t mean they can’t get a loan. In the world of equipment financing, bad credit means business owners will have a tougher time qualifying for the best rates. In addition, some banks might ask for down payments or charge a higher-than-normal interest rate.
There are ways to mitigate bad credit, though. Some considerations to make are:
Get started leasing or financing the equipment you need. Contact Yellowhead Equipment Finance today to get started. We’ll help you identify your eligibility, work with you to understand your options, and work with appropriate lenders to get the best solutions for your financing needs.