Reasons to Apply for Construction Equipment Financing
What type of small business do you run? Is it one that relies on keeping up-to-date, well-working construction equipment? If you find yourself in a bind in terms of your company’s construction needs, you might consider an equipment financing loan.
How Financing Equipment Works
Equipment loans cover a variety of equipment. However, determining exactly how much you need to borrow depends on the type of business you run. It also varies according to whether you intend to purchase new or used construction equipment. Regardless of your needs, the equipment you buy doubles as your collateral so that you don’t need to put up anything additional. Financing your equipment typically has an interest rate as small at 8% but can range as high as 30%. Term lengths are set as well but vary depending on your lender. Your lender will base the term length on the life expectancy of your equipment, but because construction equipment is typically built to last, you’ll likely have longer terms.
Why an Equipment Loan Is a Good Idea
There are several reasons to consider applying for construction equipment financing. The loan is an especially good idea if you need to make large purchases, such as machinery or company vehicles. These loans give you quick access to the funding you need to keep your business running, don’t have a lot of paperwork compared to traditional loans, and can even help you to build your personal and business credit. Financing equipment may even have tax benefits and isn’t dependent upon good credit to qualify.
The Cost of Financing
Of course, like any responsible business owner, you probably want to know how much financing will cost you per month. Imagine you need a piece of machinery that costs $10,000 and your lender offers you a 15% APR. This means you’ll pay an additional $1,500 per year, or $4,500 over three years (for a total of $14,500). If you pay $14,500 over three years (36 months), you’ll pay $402.77 per month on your loan. While it’s more money in the long run, it’s often preferable to coming up with $10,000 at once, especially for smaller companies.
When choosing a lender, look for one familiar with your industry and that has an excellent reputation among current and former borrowers. Remember to come prepared when applying. This means your credit history, business history, and a summary of your financials, at the least. Ask your lender for specific requirements to ensure the process goes as quickly as possible.