4 Things To Consider About Financing Heavy Equipment For Your Construction Business
From cranes for heavy lifting and property demolition to bulldozers for grading the ground, there can be a lot of heavy equipment involved in construction. As the owner of a construction business, you may work with a third party when you need work done with certain pieces of equipment. However, in the long term, it can be more economical to have your own heavy equipment pieces. Because the costs associated with these machines can be major, most business owners have to look into heavy machinery financing. If you are in this situation, there are a few things to consider about heavy equipment financing.
Loan terms will coincide with the anticipated life span of the equipment
When you are looking for heavy equipment financing, one thing the lender will be evaluating is the anticipated usable life span of the equipment itself. Loan terms can definitely vary according to the lender and even your credit. However, you can usually get a longer loan term and smaller payments if investing in a piece of equipment that will likely be in service for many years.
Your credit score will matter despite being a business investment
Heavy equipment is most often a business investment. Nevertheless, your personal credit score will be used to determine your worthiness as a borrower. Therefore, it will be important to make sure your score and history look healthy before seeking heavy equipment financing. For example, if you have a lower credit score, do what you can to get your numbers higher before applying so you have a greater chance of approval.
The equipment itself may stand as collateral
The market value of heavy machinery can be pretty high, even for pieces that have been in use for a few years. Therefore, these equipment pieces do tend to work out fine if you need collateral to back a heavy equipment loan. There can, of course, be exceptions. For example, if the piece you plan to buy is used, its value may not be enough to be enough collateral. Therefore, you may have to offer something else or pay a larger down payment to get financing.
You may have an easier time getting financing for a new piece of machinery
New machinery can have a higher price tag, but a lot of lenders are more comfortable financing a new piece of equipment. Used equipment pieces do tend to hold a good market value, but their anticipated life span can be less. This in itself may affect how easy it is to obtain financing unless you are interested in a short-term loan with higher payments.