Construction Equipment Financing - You Must Decide
Chris Chandler
Construction equipment financing has two primary options, loan or lease. As the owner of a business that typically uses construction equipment, the business owner has to consider both options which have their own advantages and disadvantages.
Business Loans Can Help Buy Needed Construction Equipment
Bulldozers, backhoes, and other digging equipment are some of the equipment necessary for starting a construction business is very expensive. Buying the equipment outright can be very cost prohibitive for the business start-up, but a business loan can level the playing field. If the construction equipment is maintained properly, it will last years past what a lease payment offers.
Owning the equipment outright can be a huge increase in profit margin once the debt is paid off. Once this happens your business accrues equity. This equity can be used later on down the road to help secure business financing if the need arises. However, we have found out that unsecured lines of credit offered the small business person all the extra working capital they need. Finanlly, you can also count off the equipment using yearly depreciation.
The Benefits of a Leasing Construction Equipment
The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is especially true in terms of what is called a "true lease", where you get a 100% deduction. If you do not know what we mean by a true lease, the Internal Revenue Service uses the term "true lease" to define how it is structured.
To qualify for "true lease" status, the construction equipment must be declared at fault fair market value when the leases end. This all this sounds complicated, but it really isn't. If you have questions it is good to consult with a professional tax consultant to help you figure out your best options.
The fact that you can often get the equipment that you need without any down payment is one of the primary benefits to some. Businesses, like start-ups, that are not flush with cash love this aspect if they can find it. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.
Something To Think About When Considering Leasing Verses Buying
Whether you choose buying or leasing, you need to consider all the facts. Things like tax benefits, your business plans, etc. are some of things you need to look at. I would advise that you consult with a tax consultant and think long and hard about the long term goals of your construction company.
Construction Equipment Financing can be vital to your business. Get a business financing.
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