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Heavy equipment is essential to the success of any commercial, civil, industrial, or residential construction project. Powerful earth-moving machines, including excavators and bulldozers, transform the land into construction-ready sites. Heavy-duty trucks deliver gravel, soil, and other materials to job sites, while various types of equipment are used at different stages of the construction process.
If you own a construction company or are a contractor or subcontractor, you know how important it is to have the right equipment. It can help you and your team complete construction tasks safely and efficiently and enhance their overall quality. Since heavy equipment is expensive, you must carefully consider your purchase options. Heavy equipment financing is popular among construction business owners and contractors nationwide. This Balboa Capital blog article discusses five reasons for financing heavy equipment.
1. It conserves your business’s capital.
As mentioned earlier, heavy equipment is expensive and requires a sizeable capital outlay if you plan to buy it outright. The price will vary depending on the model, size, capabilities, and features, but you can expect to see heavy equipment prices ranging from the low five figures to half a million dollars or more. Most of the time, used (secondhand) equipment is available at a lower cost, but it can still represent a significant investment for your business.
If you finance heavy equipment, you can conserve your company’s capital because a sizeable up-front cash outlay isn’t needed. Instead, you make monthly finance payments that work with your budget over a specific term. Financing helps you keep your cash and credit lines available for other business areas.
2. It gives you access to newer, more advanced equipment.
When it comes to construction and large-scale projects, having the right heavy equipment is paramount to completing any job effectively, on time, and in a manner that meets expectations. Moreover, it can help ensure your safety and that of your workers on the job site. Because financing requires less up-front capital, it can increase your purchasing power and give you access to newer, more advanced equipment that would otherwise be unavailable with a one-time cash purchase.
Whether excavating, lifting, or transporting materials, utilizing the latest heavy equipment allows your company to remain competitive.
3. It’s easy to secure.
Obtaining funding to finance heavy equipment is often easier than securing a business loan. The application process is less complex, and the eligibility requirements are less stringent. Banks and lenders that offer heavy equipment financing review applications based on several factors. These include business credit scores, personal credit scores, time in business, and business financials (annual revenue, profit, and loss).
It is important to note that some lenders are willing to work with construction businesses and contractors with average or slightly low credit scores. In addition, heavy equipment financing deals have a quick turnaround time, which is a tremendous advantage if you need to acquire one or several pieces of equipment immediately.
4. It offers tax advantages.
The Section 179 tax deduction allows you to write off all or part of the purchase price of qualifying heavy equipment in the year it’s acquired rather than depreciating it over several years. The best part? A wide array of heavy equipment falls under this umbrella.
Section 179 works with heavy equipment financing, provided the equipment is eligible for deduction. Before proceeding with a heavy equipment purchase, talking to an accountant or tax professional would be best. They can let you know if the equipment you are interested in acquiring qualifies for Section 179. In the meantime, use Balboa Capital’s handy Section 179 calculator to see estimated tax deduction amounts based on the equipment cost.
5. It helps build business credit.
Financing heavy equipment is an excellent strategy to bolster your business’s credit profile. Making timely payments throughout the financing term can improve your business credit history, paving the way for future financing opportunities with favorable terms and lower interest rates.
Remember, a strong credit profile isn’t built overnight but through consistent, responsible financial decisions. By choosing heavy equipment financing, you’re investing in your business’s future and credibility in the eyes of lenders and potential partners.
Conclusion
Before you invest in heavy equipment for your business, it’s essential to consider a few key factors. These include your current and projected construction project volume, the total cost of the equipment, including maintenance and operational expenses, and the expected usage of the equipment and its return on investment (ROI).
Additionally, your company’s budget and financial situation will be significant factors to consider in the decision-making process. After considering these and other relevant factors, you can narrow your options and select a heavy equipment vendor if you don’t already have one.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.