Construction and equipment financing is a program for businesses. People who need equipment but may not be aware of the different ways to acquire it. It contains keys terms and definitions associated with equipment financing and equipment leasing.
This is the process of acquiring and paying for the equipment to operate or grow your business. Heavy equipment can be quite expensive, but financing the cost of the equipment allows you to borrow the necessary amount and pay off the loan over time. This option usually requires a 20% down payment, so it’s best for companies that have a significant cash reserve. Once the payments are completed, the company owns the equipment. At that point, you can decide whether to continue using the equipment, upgrade to newer equipment, or sell the equipment. This link helps business owners know more about equipment financing.
It is an unfortunate fact of life that businesses do not always achieve projected sales or profitability and may be forced to default on their loans. Therefore, to protect themselves from defaults, lenders consider the equipment being financed as collateral. In case of a defaulted loan, the lender takes over ownership of the equipment. The lender can sell or lease a defaulted equipment to recoup some of the loan.
Equipment leasing is slightly different from financing in that you are essentially renting the equipment for a specified period of time. The biggest advantage of leasing is that a down payment is not usually required, which frees up capital for other uses. The disadvantage of leasing is that payments tend to be higher and you might end up paying more for the equipment. However, for businesses whose credit is mediocre, leasing is the logical choice.
Small Business Line of Credit
This financing option is just like getting a home equity loan on your house, except that it is for your business. You and the lender establish a loan amount and the money is available to use when needed. The downside is that the interest rates are generally on the higher side.
Requirements for Financing
Discussing your unique business needs with different lenders can help you select the ideal financing plan. Please keep in mind, though, that your business and credit history – including the loan amount, repayment terms, annual business revenue, credit scores (both personal and business), and the length of time that you’ve been in business which have an impact on choosing a financing plan. If parts of your business/credit history are not up to the lender’s requirements, you may have to consider alternate plans.
The concept of Construction and equipment financing and leasing can be quite confusing, but National Advance Group can help you sort it all out. We look forward to working with you on your heavy equipment financing!
Integrity, Honesty, and Service…
Sammy Ahdoot – President of National Advance Group