The success of your construction company hinges significantly on the type of machinery and tools that you purchase for it. You need a variety of equipment available to you to bid on and accept projects for clients.
However, you may not have the most generous budget available for buying new machinery and tools. Instead, you can use one of the options available to you for construction equipment financing.
Taking Out a Personal Loan
If your company is not very old or established yet, it may not have the credit or assets to secure a bank or credit union on its own. Instead of trying to get a loan in your business's name, you may need to apply for it in your own name.
If you have good enough credit, you can apply for a bank loan that may be enough to buy small machinery like a jackhammer or bobcat tractor. You can make payments on the loan using your own income until you receive payment for completing the construction project. You avoid having to apply for a bank loan in your company's name and face possibly being turned down for it.
Using the Equipment as Collateral
If your company is established enough, it may be possible for you to take out a loan using the equipment that you plan to purchase as collateral. This loan option is the most common and is similar to a personal loan for buying a car. If you default on the loan, you forfeit ownership of the equipment to the bank. The bank can sell off the equipment to recoup the money for the loan.
The value of the loan, however, will be enough to cover the purchase price of the equipment. There typically is not enough money left over to use for other purposes, such as paying taxes or tags on the equipment.
Finally, you can sell your company's accounts receivable to get money with which to buy equipment. This finance option is known as factoring and gives you close to the cash value of your accounts receivable. Once you sell them, you can use the cash to buy equipment for your company.
These options are among the most common for securing construction equipment financing. You can take out a personal loan in your own name. You can also use the equipment as collateral or sell your accounts receivable to get the money.
To learn more, contact a construction equipment financing service.
Share28 December 2020
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