Securing used equipment financing for your construction business doesn’t have to be a hassle. While it's true that some companies will not finance or lease used equipment, many construction equipment dealers and other lenders do. To ease any trepidation you might have as you begin to look for capital equipment, we've put together some advice on how to secure financing for your construction business.
THE BENEFITS OF USED EQUIPMENT FINANCING
Used equipment financing eliminates the need to spend a large sum of money up front. Opting for a construction loan means you can sign up for the lower price tag associated with a piece of used equipment and pay less in the long run.
Most construction equipment dealers offer thorough multi-point inspections on all of their pre-owned equipment. These inspections certify each piece of used equipment is in good working condition. If the service technician finds something that needs to be replaced before you take it on the job, you can guarantee it will be taken care of. And even though you’ll be adding older equipment to your fleet, you can rest assured it will be up to standards and ready for your work.
HOW TO PREPARE FOR USED EQUIPMENT FINANCING
There are a number of things to take into consideration before beginning the finance or lease-to-own application process: credit history, profit margins, growth management, transparency, and personal guarantees. You'll want to identify anything that can raise a red flag before working with your dealership so you can prepare any supporting evidence your company may need.
Although a history of late payments doesn’t really work in your favor, financing departments often take a look at how you’ve managed payments through tougher times, as well as your most recent performance. If you have followed through with commitments and can show a history of doing so, a construction equipment dealer’s financing department will be more open to securing your company the best rate possible. Granted, if your credit history is on the sub-par end of the spectrum, used equipment financing rates are going to be much higher than if you had great, or even good, credit.
A FEW OTHER FACTORS TO KEEP IN MIND
When dealing with used construction equipment, it pays to know the age of the equipment and the hours on the machine. The older a piece of equipment is, the less likely the used equipment financing option is. However, anything under ten years old will most likely generally come with affordable and fair used equipment financing rates. This is when lease-to-own equipment financing or construction loans come into play. If you opt for a construction loan, however, be aware that you may not be able to write off the payment as an operating expense on your company’s taxes. Still, a majority of the time and money saved buying used equipment versus new equipment is worth the tax impact.
Interested in learning more? Papé Machinery offers excellent used equipment financing options, including construction loans and lease to own equipment financing. To find out more, contact a finance manager at Papé and discuss the best options for you and your business today.