Equipment financing is almost tailor-made for contracting businesses. As a business requiring multiple types of expensive, specialized heavy equipment, you can really make that equipment work for you. Your construction company can purchase equipment with the lender’s money, using the equipment itself as your loan or lease collateral. Meanwhile, you’re also actively using that same equipment to further your business. There’s a big difference in the end, in equipment leasing vs equipment financing (loan).
Equipment Leasing for Contractors: A Rent-then-Return/Upgrade Arrangement
You “rent” the equipment from your lender on monthly payments (which may be tax-deductible). When the lease ends, you can either return the equipment, extend the lease period, or buy the used equipment from the lender. This can be a great option for unique projects that require a pricey tool or vehicle you don’t normally use–and may not need to keep long term. The lease also works well for equipment/tools that need to be upgraded often. If you continually need the latest and greatest version of this item to run or grow your business, a lease can work perfectly.
Contractor Equipment Financing: A Loan to Purchase Equipment
Here, your lender pays for the equipment purchase, and you make monthly payments according to the loan’s terms–until you pay off and own the equipment. The equipment financing (loan to purchase) allows you to save your working capital to run your business, rather than laying out a large sum immediately to buy the equipment. Yet you still get the equipment you need now, in exchange for a relatively small monthly payment. You’ll eventually own the equipment free and clear when you finish making the payments. This financing option great for expensive, workhorse equipment that you’ll use long term. (It’s not for equipment that will become obsolete while you’re paying for the loan. It’s also not for equipment/tools you’ll need to update or upgrade often. For these situations, see the Lease described above.)
Now that you know how to use equipment financing to stay competitive in your business, contact The Capital Rams to learn about your specific equipment financing options, today.
