Equipment is necessary for any construction business. You need to have the latest machinery so that workers can do their jobs and do it effectively. Material and equipment costs are high, and they keep rising over the years so you will need financing. When you are seeking new or used equipment for your construction business, there are construction equipment financing solutions available.
If you go to traditional bank to ask for equipment financing, you might have trouble with the lenders because construction projects tend to be unpredictable and they will be unwilling to help you out. However, there are construction equipment loans available who are willing to partner with you. Construction equipment loans can have amounts of up to $5,000,000 and with interest rates starting at 7.5% and the repayment terms are 1-5 years.
How to Qualify for Construction Equipment Financing
In order to qualify for construction equipment financing, lenders will verify that your business has been operating for at least one year and brings in $50,000 or more in annual revenue. They also look for a credit score that is above 659.
Some examples of what type of equipment can be financed are vehicles, cranes, trailers, computers, desks, bookkeeping management software and more. The equipment itself will act as collateral to be used to secure the loan. You might even not need to provide a down payment because of the collateral. However, if you have poor credit or insufficient cash flow, your lender may ask you to make a down payment on the equipment. It is important to note that if you default on payments, the lender will take ownership of the equipment.
Benefits of Construction Equipment Financing
There are several benefits for seeking construction equipment financing for your business:
- You will be up to date with the latest technology your business needs to succeed. It is important to stay up to date and investing in the current equipment and technology so you can complete projects quickly and make profit.
- You can have more financial flexibility than other forms of borrowing. The lender will work with you to customize a solution.
- Your exposure to risk is reduced since it will help shield your business from any unexpected occurrences so you can fully concentrate on the growth of your business.
There are many different types of vehicles, tools, and machinery you can finance with construction equipment financing such as:
- Vehicles – forklifts, bull dozers, dump trucks
- Computer equipment – mobile computing, tablets
- General machine equipment – tablets, software
- Tools – welders, backhoes, jackhammers
- Miscellaneous equipment needs – security system
Alternative Options for Construction Equipment Funding
When it comes to small business financing, there are other forms of financing that you can consider when looking for construction equipment funding.
A term loan, or a business loan, are reliable and you can borrow large amounts of up to $2 million. The repayment term is usually between a few months and up to 5 years and the payments are monthly, bi-monthly, weekly, or daily payments. Term loans are a good option for those businesses who have predictable long-term expenses. They might have a fixed interest rate or a variable one depending on the lender. Term loans are appealing to many small business owners because of the versatility of the loan.
Short Term Loan
If you are looking for short and fast funding, then you are better off seeking a short-term loan. Although the maximum amount you can get is lower than a term loan, around $500,000, you can get the money in just a couple of days. This comes in handy if you are needing funds quickly due to an unexpected business situation.
Although you get funds faster with a short-term loan, they tend to have higher interest rates and repayment terms of 1-3 years.
Business Line of Credit
A business line of credit, also know as a revolving line of credit, is also another great financing option. You can qualify up to $500,000 and you have unlimited access to amount that was agreed upon. As soon as the borrowed money is paid back, the full amount is available again. This method is very different than traditional business loans and is mostly favored by business owners. To qualify for a business line of credit you are required to have a credit score of at least 560, your business should be in business at least 6 months, and have at least $50,000 in annual revenue.
It is important to find the best solution for what your construction business needs are whether it is through construction equipment financing or a term loan or a business line of credit. Make sure to do research beforehand and weigh all of your options before applying for financing.