If you’ve been running a construction business for some time, then I’m sure you know how much bankers hate risk. They require countless financial documents, take forever to review them, and after all that require even more documents and probably collateral! You may not be aware of it, but times have changed, and financing equipment doesn’t have to be as hard as it used to.
Here are a few myths about equipment financing you need to dispel.
The first myth you should start ignoring is that you always have to put money down when you’re looking to buy a commercial vehicle. If you go into your bank to talk over the equipment you require, then your hands are going to be tied. They require a large down payment on homes and commercial property, and then simply carry this policy over to heavy vehicles.
When it comes to equipment financing companies though, you usually don’t need to put any money down. Rather than throwing all your capital at a depreciating asset, it’s almost always better to find a finance company and put down… well, nothing! Even if your financing firm does want a down payment, you can bet that it will be better than the bank’s.
Another common myth about equipment financing is that once you’ve bought in, you’re going to be stuck with the equipment indefinitely. At one time, this was the most common and conventional way for a construction company to get their hands on a piece of heavy machinery. However, the equipment you need is much more accessible now. Finance leases are becoming a far more popular way to finance equipment.
Legally speaking, you’ll never own the equipment. However, you’ll be responsible for all maintenance and insurance, so will have to deal with all the risk and reward of the equipment as an asset. Then, there’s operating leases, where you’re renting the equipment plain and simple. Services such as plant hire from Total Plant Hire are springing up more and more within the industry.
The final myth is that you’ll only have access to cutting-edge and highly expensive pieces of equipment. If you’re going to restrict your financing options to banks and banks alone, then maybe this will end up true for you. Most banks will impose strict age caps on the equipment they’re prepared to finance, and therefore charge figures which will make you feel faint! If you know the job you’ve got lined up really requires the latest possible equipment, then I’m afraid the bank is the only option.
However, if you know that you could use a slightly dated machine and still complete the job just as well, you stand to save a lot of money. Find a good finance company with a fleet that’s been around for a few years, and you’ll find the financing much more favourable!
Hopefully you made it to the end without groaning about some past mistake! Conventional equipment financing may be fine for some projects, but don’t ever think that your options stop there!
Featured Source: Wikimedia