What You Should Know About Taking Out Loans for Construction
The price of construction equipment requires a big investment to keep your construction business productive and competitive. Fortunately, financial lenders offer construction equipment loans to help businesses like yours obtain what they need to provide services.
Construction equipment loans are different than other types of business loans. Let’s answer your questions about what construction equipment loans are and how they can help your business grow.
Why do you need a construction equipment loan?
If you’re building your construction business, you’re going to need equipment to get started. Machinery, vehicles and other equipment for a construction business are not cheap. Constructions equipment loans, construction equipment financing or heavy equipment financing can help you purchase the equipment you need.
A construction equipment loan provides you fast access to cash to buy the equipment you need. A construction loan arrives more quickly than other loans because it requires less paperwork. Your collateral for the loan is the equipment you buy. Even if your credit is bad you have a chance of getting a construction loan, and it can help you build your credit.
Another option is to lease your construction equipment. While this may make it easier to obtain in the short-term, you won’t own the equipment when the lease is finished. This means that equipment is not an asset and you can’t get tax benefits for purchasing it. If the equipment will be outdated or useless soon, leasing may be your best bet.
How do construction equipment loans work?
Constructions equipment loans are similar to car loans. Since the collateral is the equipment, you don’t have to contribute additional collateral. The interest rate is between 8 and 30 percent, and the payment is fixed so you can plan confidently.
Equipment loans vary, and the amount and terms depend on the equipment you plan to buy and how long it’s expected to last. Your loan generally won’t have terms longer than the life of the equipment.
How much can I expect to spend?
Any financing option will cost you more than a cash payment in full. If you’re unable to pay for construction equipment, a loan will help you make money sooner to pay for the equipment and get your business started. While you may pay an extra $1,000 to $3,000 in interest on a $10,000 piece of equipment, it’s still a sound business decision.
The best part about using a loan to get the equipment now is that your business can count the equipment as an asset, and possibly qualify for a tax deduction.
Do I qualify for a construction equipment loan?
Qualifying for a construction equipment loan is relatively easy. Still, you need to be prepared when meeting with your lender to help you get the best rates possible. Have the value of the equipment, your credit rating and information about your business.
If your construction company needs financial advice, our financial specialists are ready to help. Contact Patin and Associates today to get started.