With construction equipment financing, you can obtain heavy equipment for your business without having to pay upfront. Even if you have the funds to purchase construction equipment, it’s a better business strategy to finance equipment and maintain your cash flow.
There will be a time where you experience cashflow shortages and therefore equipment financing gives you an option to free up capital for other expenses. If you need to take out a construction loan, you can use the money to finance construction equipment.
There are two main types of equipment financing, the first is equipment leasing. You can lease equipment which is where the lender purchases the equipment and you pay them in installments for the right to operate that piece of equipment, but you will not own the equipment at the end of your lease term. However, most lenders will include a clause that will allow you to purchase the equipment based on its residual value at the end of the lease term. The residual can be as low as $1 - $250.
The second is an equipment loan. An equipment loan is an amount of money borrowed for purchasing equipment and is repaid with regularly scheduled payments. At the end of the financing term, you will own the equipment outright. While most equipment loans are unsecured, the equipment itself acts as the collateral to the loan and the lender may repossess the equipment if you fail to make your payments.
So what are the benefits of equipment financing for your construction company? Well, there are many, and the team at Blue Capital Equipment Financing wants to share 5 reasons why you should consider equipment financing.
1. Tax benefits
Construction is a fast-paced and booming industry, and the last thing you want to do is pay more in taxes than you need to. As a business owner who is financing construction heavy equipment, there are many tax benefits available to you.
Lease payments are usually tax-deductible against your income each year of your lease term. Lease payments are treated as an expense rather than depreciating your equipment as a capital cost.
Construction equipment can depreciate, and equipment leasing keeps your money in your company and not with a depreciating asset. Leases are not subjected to PST or GST upfront and instead, the taxes are paid on the individual monthly payments.
2. Preserve your cash flow
Monthly loan payments allow you to pay for your construction equipment steadily over the term without taking from your bottom line. When you sit down with a team member from Blue Capital, you will be able to customize your financing loan and allow you to better budget and plan for your business.
In most cases, an equipment lease covers all costs associated with your new equipment, including shipping, delivery, warranties, accessories, and any other necessary soft costs.
By leasing your equipment, you’re able to budget and work with a consistent monthly lease payment. This way, you’re able to grow and still keep your line of credit.
3. Protect against inflation
Financing your construction equipment helps protect your business against inflation. If you pay for your construction equipment outright, you get rid of your free cash.
Inflation may not be all that noticeable on smaller purchases, but it can seriously impact your financial growth when it comes to heavy construction equipment, which tends to come with at a much higher price
4. Seasonal work
If you are operating a construction company in British Columbia, you know that it is a seasonal business. This means that there can be months of downtime. When you finance equipment you can plan ahead and create a payment plan that aligns with your revenue stream.
You can make it so your business makes smaller payments during the winter and larger payments during peak months. This strategy will greatly help your business.
5. Work with lenders who know the industry
There is a huge advantage to working with an established equipment financing company like Blue Capital. They have an extensive network of clients in multiple industries so not only can they help you find construction equipment for you to finance or lease, they can help you find a buyer when you’re ready to sell.
Blue Capital Equipment Finance is a nationwide finance brokerage, and we have years of experience helping businesses grow with equipment financing. We offer many financial services and can help you easily get approved with zero down payment options and low-interest rates. We have multiple finance options and can help you find the right loan for your construction business so that you don’t have to let old, and unreliable equipment slow you down.