The nature of financing construction equipment is complex, with lots of moving parts. They must take into account a few factors in order to plan for annual expenses. Of course, construction equipment is usually a factor when it comes to these expenses, which is why financing is such an attractive option for those involved in the business. Let’s take a look at the best reasons to finance your construction equipment, moving forward.
#1) TAX BENEFITS GALORE
Construction is a rigorous business. The last thing you want to do is pay more in taxes than you have to, especially with so many benefits available to you as a business owner. When financing your construction machinery, be sure to research all available tax benefits beforehand so you can forecast your takeaway earnings accordingly. Tax deductions tend to center around interest payments on your loan, and the depreciation of your assets. In Canada, things are more specific with options like TRAC, Dollar Out and Fair Market Value. Be sure to get the advice of an expert to learn more. The more money you save in taxes, the more funds may be reinvested in other key areas of your business.
#2) PLAN FOR OBSOLESCENCE
Financing allows business owners an affordable way to keep their equipment in tip-top shape at a reduced cost. The last thing anyone wants to do is purchase new equipment outright at a time when expected cash yields might be difficult to predict. To minimize risk of equipment failing, which would force an unexpected and costly replacement purchase, choose financing instead. Inserting finance payments into your annual equations creates an extra layer of predictability, not to mention the soundness of mind. Finally, don’t forget about warranties on new purchases. If you’re buying new, you’re also buying some peace of mind for the foreseeable future. Construction equipment is very complex machinery, and with all those moving parts to think about, it pays to have a financial safety net in case something goes awry.
#3) HEDGE AGAINST INFLATION
Tapping into equipment financing really does help your business hedge against inflation risk. Consider the ramifications of placing a large down payment on equipment, or paying for the total cost all at once. It ties up your free cash, which makes little financial sense in terms of inflation. Equipment financing will allow you to make a series of payments over time, and the lender will be the one who absorbs the devaluation of these payments over the course of the financing term due to the inevitable inflation. Inflation may not be all that noticeable on smaller purchases, but it can have drastic repercussions on your financial growth when it comes to heavy construction equipment, which tends to come with a much higher sticker price. This is where a little forethought can go a long way, and add to your company’s overall growth strategy.
#4) THE SEASONAL FACTOR
Construction is a seasonal business, and that means peak months vs. downtime. When work is light, so too is your revenue stream, and that means planning ahead for finance payments. Luckily, you can match the timing of your revenue stream with your expenses by having smaller payments take place during the winter and spring seasons, where construction work is less heavy. This can lift a tremendous burden off your shoulders and allow you to strategize paying your expenses according to these off seasons.
#5) PRIVATE SALES
Another advantage to financing your construction machinery includes the private sales of said equipment between two companies. This can be done without a dealer having to get involved, since construction finance companies already know the business, and have set up their own client circle. This is a great advantage for your company, should you wish to sell existing equipment in favor of perhaps purchasing new equipment, or getting rid of one piece of equipment in order to buy altogether different products that might assist your business. Having an established and experienced construction equipment finance company doing the heavy work for you not only saves time, but can set you up with the right buyers who are more inclined to make a deal.
Once again, the complex nature of the construction industry coupled with necessary costs and growth potential means that financing is one of the best options available, bar none. A construction company can have the newest top-of-the-line equipment available at any time thanks to the flexibility and cost-effectiveness of financing, which is a major boon for those looking for some extra security. It also adds more value to your company through the acquiring of these new assets, which is a major plus for your portfolio. Your equipment lifecycle may also be managed on a timetable, and scheduled to coincide with a windfall year, or when maintenance warranties are set to expire. In short, financing construction equipment allows for foresight and planning several years down the road, which is invaluable when analyzing your growth rate vs. inherent costs.
To learn more about how you can use financing for the purchase of your construction equipment, please visit us here. All makes and models of construction equipment are available for financing, both new and used. Finance only what you wish to buy, with our help!