Construction Equipment Financing

Written by Steve Thompson

Thousands of would-be entrepreneurs try to break into the construction industry every year, but many of them fail miserably. When all is said and done, a successful construction company is both careful and conservative with cash flow until an established clientele is formed. One effective way to manage cash flow is to take advantage of construction equipment financing. Since many construction businesses can't afford to buy cranes, compactors, loaders, forklifts, and other machinery up front, leasing and financing are essential.

Understanding the construction industry
The construction industry is incredibly competitive, and although it's comprised of a wide variety of diverse markets, finding prospective clients can be difficult. Even if you specialize in a niche industry, such as government contracting or multi-family housing units, your work must be superior to your competitors'. Furthermore, you must have the capital to purchase equipment before you can solicit your first clients.

Options for construction equipment financing
If you can't afford to purchase equipment up front for your construction business, you have two basic options: financing through a third-party lender or financing through a heavy construction equipment rental and leasing agency. Either of these options will get you what you need, but it's important to consider them both carefully.

Construction equipment financing through a third-party lender means that you obtain a loan or line of credit through a financial institution like a bank or credit union, and then use that money to lease or purchase equipment through another company entirely. This option usually includes high interest rates, and will require you to disclose significant financial information about your business.

The second option, obtaining financing and equipment through the same enterprise, is somewhat easier and often includes perks that the first option doesn't. For one thing, you might receive maintenance, repair, and training for free with your lease. Also, interest rates are often lower when you get financing and equipment through the same provider. However, it requires you to do business with just one company, which might limit your options.

Setting the terms
When you decide to pursue equipment financing, it's best to have all of the information prepared before you go shopping. Know exactly what type of equipment you need, which manufacturers you prefer, how much money you have to spend, and what you can afford to pay over the life of the lease or the loan.

Armed with that knowledge, you'll have more negotiating power and won't waste time on options out of your price range. The construction industry might be competitive, but you should know that financing and leasing companies are just as eager for your business.

Construction equipment financing might be a difficult hurdle in the expansion of your business, but once you find a lender you can trust, future transactions will be easier. Take the time to do your research and to check references while you conduct your search, and consider the counsel of a consultant or attorney if you aren't sure how to make the right decision.

BuyerZone can help you find a leasing company for your construction business. Use our free request for equipment leasing quotes form, and we'll match you to multiple providers who will help you find the appropriate financing agreement.