What is the best financing solution for compact construction equipment?

Research from the U.S. Bureau of Labor Statistics projects that the heavy equipment industry will grow 10 percent by the year 2028, and in return, the need for heavy equipment will continue to rise. 

As the industry continues to expand, it is imperative that companies stay competitive with the necessary equipment such as compact construction equipment financing options. 

When searching for used or new compact construction equipment, it is important to understand the opportunities available to your company. Which option would be the best? Equipment leasing or financing? Here are some of the things to consider to find out: 

1. What’s the driving need?

Compact construction equipment is smaller and more tailored equipment, however, is buying larger equipment the best option for future projects? The disadvantage of purchasing too small or large equipment is that it might not fit in the project’s environment. Don’t forget about storage and transportation as well. 

Another factor to consider is if it is time to invest in newer equipment. Old, obsolete equipment can cause downtimes during projects, require additional maintenance costs, lessen employee productivity and satisfaction, and lead to being forced to replace equipment rather than being proactive. 

2. How long do you plan on keeping the equipment? 

For construction companies who are searching for new equipment, it is important to keep in mind how long you will need the equipment. If this equipment is for a project that will take a couple of years, but will be obsolete after said project, it might be best to lease the equipment. 

For companies planning on using their equipment to grow their operations for the long haul, it is recommended that construction equipment financing to fully own the machines would be the better option. 

Don’t forget to also consider the maintenance on the equipment, the fuel costs, transportation costs, and technology upgrades the machine may need over the course of its lifetime.

3. What does your current cash flow look like?

Issues can arise when cash flow is not managed properly, opportunities are not acted upon, or risks have been taken. Construction companies, in particular, can encounter cash flow issues due to their seasonality and fluctuations in demand.

A company has the ability to improve and reduce risk when it comes to cash flow by increasing sales, but this implies having the right equipment in place for the construction industry. 

When looking to lease or finance equipment, your cash flow is important because when going to finance a piece of equipment, your company will need to make a downpayment for the machine. 

It is important to have that cash on hand if that is the option you choose. Both leasing and financing will help to break down the overall costs of the equipment into monthly payments, but with leasing, you can set the terms and loan amount, whereas financing will take place until you have paid off the equipment. 

A cash flow analysis can help you to decide which option is best for your company. 

4.  What should I do next? 

What are the next steps? When you are ready to lease or finance compact construction equipment, but don’t know which option to choose,  contact one of our specialists. Our team is here to help, any time of the day.