Heavy equipment is needed for any small construction or landscaping business. You need to drill, dig, move, lift, flatten and take on many more tasks that simply aren't practical for employees and hand-held tools alone. Let's look at the reasons why smaller companies should strongly consider leasing and financing options when it comes time to bring new equipment into the fold.
What is heavy equipment financing?
Heavy equipment financing simply means using a loan or lease to secure a major piece of machinery for your business. A loan involves borrowing the funds from a lender, then paying for the equipment in the short term while more slowly paying off the loan over a period of months or years. A lease is, in basic terms, a way to borrow the equipment and pay for its use over time. However, many leasing options also include a provision for purchasing the equipment once the lease is partially or fully complete. This can provide extended value to small-business owners, as you can decide to keep using a specific piece of equipment that served them well in the past and acquire it for a much more reasonable cost as compared to another new asset. You can even donate that purchased equipment once it's reached the end of its usefulness for your business, providing another benefit.
Important financial considerations for small businesses
Most small businesses don't have the deep pockets that large, established businesses often have at their disposal. Owners and decision-makers at these smaller companies have to make very careful decisions about how they spend money and the way they approach large purchases in light of their annual revenues. Balancing the need for substantial assets like heavy equipment with the importance of maintaining cash reserves and working capital often means an outright purchase isn't an effective idea, as it ties up too much money in a single asset. This can drain available cash to making it harder for your business to address emergencies.
Instead, small-business owners can turn to heavy equipment financing and leasing options. This approach spreads the cost of acquisition out into many monthly payments while still providing immediate access to the necessary machinery. A predictable schedule for repayment of the loan, lease or business financing option makes it that much easier to budget for financial obligations. Flexibility is also an important consideration in this context. The repayment plan tied to heavy equipment financing is often variable, with shorter and longer terms available.
While all lenders will set upper and lower limits about the term length of a lease and the repayment of a business loan, there's plenty of room in the middle for companies to find an effective balance. Remember that a longer term will involve a lower monthly payment but more money paid in total over time due to interest, while a shorter term leads to the opposite. You can work with your lender to find the balance that works best for your specific needs.
Do I need to worry about my business having bad or no credit?
A high personal and business credit score is always an asset when it comes to seeking out heavy equipment financing and leasing options. It often means you can take advantage of lower interest rates and more flexible terms, among other benefits. However, no or low credit doesn't automatically disqualify you from securing financing. Getting in touch with your preferred lender and starting a conversation is a simple and direct way to learn more about what options exist for your company and how you can best leverage equipment financing.
What you can do with heavy equipment financing for your small business
You already understand that heavy equipment financing makes it possible for your business to acquire the machinery it needs to complete critical tasks. You don't want to only look at this powerful option as a way to acquire a single piece of machinery. While your lender will vet your finances and make sure it's confident your business can handle the added obligation, you can often secure a lease or loan for more than one piece of equipment at a time. This is a vital consideration whether your business encounters a major opportunity to expand the types of jobs it takes, or simply has a chance to start doing more work in the same field. In these cases, it's especially important to keep your assets insured and protected.
The next step to financing heavy equipment is to get in touch with a dependable lender. To find out what Cat Financial has to offer, request a quote today.