Equipment Financing in Construction | Finance Facts
Here's a more detailed overview of equipment financing in the construction industry, along with industry-specific considerations:
1. Types of Equipment Financing:
Leasing: Construction companies can opt for operating leases (short-term) or capital leases (long-term). Operating leases allow flexibility, helping companies to use equipment for specific projects. Capital leases usually involve larger equipment purchases and often offer a purchase option at the end of the lease.
Equipment Loans: These debt financing loans are tailored for used equipment purchases. Construction companies can choose fixed-rate loans with set repayment schedules, making budgeting easier.
Sale-Leaseback: Construction companies can sell existing equipment to a lessor and lease it back. This can inject capital into the business while allowing continued equipment use.
Equity Financing- You obtain finance as part of equity financing in exchange for a percentage of the equity in your company; you are not required to pay back the money you received.
Combination Financing- A combination of the two is combination financing. This sometimes entails taking capital in return for stock in a company, with the idea that at least a portion of the money will be repaid later.
2. Benefits:
Project-Specific Financing: Leasing offers the flexibility to get specialised equipment for specific projects without committing to long-term ownership.
Avoiding Obsolescence: The construction industry often sees rapid technological advancements. Leasing allows companies to regularly upgrade to newer equipment models.
3. Industry-Specific Considerations:
Heavy Machinery: Construction relies on heavy equipment such as bulldozers, cranes, and excavators, informally know as “yellow iron.” Equipment financing should consider the substantial cost of these assets and the potential for high resale value.
Specialised Tools and Project Complexity: Complex projects often require specialised equipment that might not be needed in the company's regular operations. Construction requires various specialised tools, such as concrete mixers, scaffolding, and power tools. Financing options should address the need for these tools in different projects.
Project Duration: Equipment needs vary based on project timelines.
Flexibility for Growth: Growing construction companies might need scalable equipment financing solutions to accommodate expanding equipment needs.
Regulations and Compliance: Construction equipment must often adhere to safety and environmental regulations. Financing options should consider the costs of compliance and potential modifications. Different regions might have specific rules or tax incentives influencing equipment financing decisions.
Construction Types: Different construction projects, such as residential, commercial, and infrastructure, require varying equipment. Financing should align with the company's focus.
Equipment Lifespan: Certain heavy machinery, such as excavators and cranes, can last longer. Equipment loans might be better for these items, as the company can own and use them over extended periods.
Depreciation: Construction equipment tends to depreciate over time due to wear and tear and technological advancements.
Emerging Technology: The construction industry embraces technology for fleet management, such as GPS-guided machinery and telematics.
Resale Value: Some equipment types, like dump trucks or concrete mixers, might have better resale value than highly specialised equipment. This can influence the choice between leasing and buying, as leasing avoids the hassle of reselling.
4. Challenges and Considerations:
Variable Cash Flow: Construction projects can have unpredictable cash flows. We can help with PO financing to get sub-contractors paid. Our programs are great for morale and offer a fast injection of cash.
Customisation: Owning equipment allows for customisation, which might be essential for specific projects.
Long-Term vs. Short-Term Needs: Equipment financing should align with the company's short-term project needs and long-term growth plans.
5. Equipment Management:
Maintenance and Repair: The responsibility for equipment maintenance can vary depending on the financing arrangement. Construction equipment needs regular maintenance. Some financing agreements may include maintenance services, while others might require the company to handle upkeep.
Insurance: Adequate coverage protects owned equipment from damage, theft, or accidents.
4. Application Process:
Equipment Appraisal: Lenders may assess the value and condition of the equipment to determine financing terms.
Industry Experience: Construction companies with a solid track record may receive better financing terms due to their experience and credibility.
Insurance Requirements: Lenders may require you COI to verify insurance coverage for financed equipment to protect against damage or loss.
The following documents are required to apply for loans for heavy equipment:
A cancelled business check
A driver's license
3 -6 recent bank statements
Business and personal tax returns
Equipment quote or vendor invoice
Financial statements (outlining income, expenses, and profits)
5. Future Trends:
Technology Integration: As construction technology advances (e.g., telematics, IoT), financing agreements might include provisions for technology integration and updates.
Sustainability: With a growing emphasis on eco-friendly practices, financing options might incorporate considerations for environmentally friendly equipment.
Remote Monitoring: IoT-enabled equipment can allow lenders to monitor equipment usage remotely, potentially impacting financing terms based on usage patterns.
Financing equipment is generally more affordable in the long run, and the sale-leaseback option exists at the end of the term. Equipment financing in the construction industry is a versatile tool that enables companies to access necessary equipment while managing their financial resources effectively.
Industry-specific considerations are vital to keep top of mind when purchasing equipment. Understanding the unique demands of construction projects is essential in making informed financing decisions.
Remember, each construction company's equipment financing needs are unique. Consulting service financial professionals specialising in construction equipment financing can provide tailored advice that aligns with specific circumstances and goals based on individual company needs and market conditions.
Some of the Heavy Equipment we finance
1. Bulldozer
2. Excavator
3. Backhoe
4. Skid-Steer Loader
5. Motor Grader
6. Trencher
7. Wheel Loader
8. Crawler Loader
9. Front End Loader
10. Scraper
11. Dump Truck
12. Cement Mixer
13. Asphalt Paver
14. Pile Driver
15. Road Roller
16. Cold Planer
17. Track Loader
18. Compact Track Loader
19. Wheel Tractor-Scraper
20. Wheel Dozer
21. Articulated Truck
22. Material Handler
23. Telehandler
24. Dragline Excavator
25. Hydraulic Hammer
26. Pneumatic Drill
27. Tunnel Boring Machine
28. Feller Buncher
29. Harvester
30. Forwarder
31. Skidder
32. Knuckleboom Loader
33. Yarder
34. Log Loader
35. Mulcher
36. Stump Grinder
37. Chipper
38. Asphalt Plant
39. Concrete Plant
40. Crusher
41. Screening Plant
42. Wash Plant
43. Compactor
44. Paver
45. Tower Crane
46. Mobile Crane
47. Telescopic Handler Crane
48. Rough Terrain Crane
49. Crawler Crane
50. All Terrain Crane
51. Truck Mounted Crane
52. Loader Crane
53. Floating Crane
54. Rail Crane
55. Aerial Crane
56. Gantry Crane
57. Jib Crane
58. Bridge Crane
59. Derrick
60. Overhead Crane
61. Pile Boring Machine
62. Pile Driving Machine
63. Cherry Picker
64. Scissor Lift
65. Boom Lift
66. Vertical Mast Lift
67. Forklift
68. Reach Stacker
69. Container Handler
70. Order Picker
71. Pallet Jack
72. Tow Tractor
73. Sideloader
74. Telescopic Handler
75. Straddle Carrier
76. Log Handler
77. Dumpers
78. Concrete Pump
79. Concrete Mixer Truck
80. Concrete Conveyor
81. Roadheader Machine
82. Shield Tunneling Machine
83. Jackhammer
84. Piling Rigs
85. Road Rollers
86. Snowcat
87. Snow Groomer
88. Ice Resurfacer
89. Snow Blower
90. Snowplow
91. Tracked Snow Vehicle
92. Snow Thrower
93. Snowmobile
94. Street Sweeper
95. Garbage Truck
96. Water Truck
97. Vacuum Truck
98. Fire Truck
99. Aerial Work Platform
100. Tunnel Boring Machine
101. Landfill Compactor
102. Cold Milling Machine
103. Soil Stabilizer
104. Recycler
105. Asphalt Paver
106. Slipform Paver
107. Curb Machine
108. Road Wideners
109. Windrow Elevator
110. Shuttle Buggy
111. Tack Distributor
112. Asphalt Distributor
113. Chip Spreader
114. Pneumatic Roller
115. Vibratory Roller
116. Rotary Drilling Rig
117. Horizontal Directional Drill
118. Pit Launch Drill
119. Rock Drill
120. Auger Drill
121. Well Drilling Rig
122. Core Drill
123. Down-the-hole Drill
124. Blasthole Drill
125. Diamond Drill
126. Air Track Drill
127. Subsurface Drill
128. Jackleg Drill
129. Jumbo Drill
130. Roof Bolter
131. Continuous Miner
132. Longwall Shearer
133. Roadheader
134. Shuttle Car
135. Underground Loader
136. Underground Truck
137. Roofbolter
138. Scaler
139. Shotcrete Machine
140. Tunneling Machine
141. LHD (Load, Haul, Dump machine)
142. Mining Truck
143. Mining Loader
144. Dragline Excavator
145. Bucket-wheel Excavator
146. Hydraulic Shovel
147. Cable Shovel
148. Cab-over truck with body
149. Highwall Miner
150. Dredger
151. Underground Mining Equipment
152. Surface Mining Equipment
153. Drilling Equipment
154. Earth Mover
155. Rock Breaker
156. Sand Blasting Machine
157. Batching Plant
158. Roto Packer
159. Bagging Machine
160. Compressor
161. Generator
162. Welding Machine
163. Paver Finisher
164. Bitumen Sprayer
165. Roadliner
166. Pneumatic Tyred Roller
167. Motor Grader. Pipe Layer
168. Hydraulic Broom Sweepers