Financing equipment can help your construction company acquire the heavy machinery you need without depleting a lot of business capital. The most common types of equipment financing loans have fixed interest rates with set monthly payments plus interest. It’s important to evaluate your company’s needs, check your personal business and credit report and find the best deal when considering a loan.
When it comes to eligibility, financing companies consider the industry you’re in, the amount of time your company has been in business, your company’s annual revenue and personal credit scores. You are more likely to get the loan if your credit score is good, but a bad credit score does not hinder your ability entirely. If your company is in good standing, you can submit an application.
Lyon Auction hosts large construction equipment auctions and we offer construction equipment financing. Continue reading to learn how financing works as well as the pros and cons of financing.
How large construction equipment financing works
You will want to know what machine you’re going to be purchasing and who you’re going to be purchasing it from before contacting a financing company. For example, “I’m looking for a wheel loader and will be purchasing it from Lyon Auction.” Sometimes, the equipment financer will directly pay the vendor and you will then pay the financer through monthly payments.
Loans typically last anywhere from two to seven years. During this time, you will make set monthly payments plus interest to the financing company to completely pay off your loan. If for some reason you default on your loan, the financer will repossess and resell the equipment.
Pros and cons of equipment financing
It really comes down to your company’s needs. Sometimes financing is a great option and sometimes it isn’t. If your company can afford to purchase the equipment outright, you will save more in the long run. A company that uses heavy machinery can typically get the most out of financing. Consider how much your company needs the equipment, if the equipment will improve efficiency and how long the equipment will be used.
One of the main pros of financing is that it spreads the cost out over time, so you can continue to grow other aspects of your business. You are better able to scale your business, spread out large capital costs and there is no additional collateral needed. Some cons, however, are that there may be high interest rates, meaning you end up paying more over time. Also, your use is restricted to equipment.
Attend one of our large construction equipment auctions
We have several partners who help with construction equipment financing, including Smart Business Credit, Patriot Financial LLC, Streamline Financial Services and Oakmont Capital Services. If you’re interested in attending an auction and financing heavy equipment, contact us today!