What Business Owners Need to Know About Heavy Equipment Financing

What Business Owners Need to Know About Heavy Equipment Financing

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A business owner in need of heavy-duty machineries such as trucks and heavy construction equipment needs a significant amount of financing. The amount of cash involved in purchasing heavy-duty machinery is higher when compared to the funding required by a regular business such as a restaurant. 

Once this business owner has determined the equipment, he or she needs to figure out how to pay for it. If the business owner has to acquire heavy-duty equipment, the options available are buying or leasing the equipment. 

As a business owner, purchasing such equipment makes sense if you are confident that your firm will be utilizing it for a long time. One benefit of making the purchase is that the lifetime cost of the asset will be less as compared to when leasing over the same period. Additionally, if you buy the equipment, you will treat it as an asset on your balance sheet meaning you can make a depreciation claim while filing your tax returns. 

However, it is worth noting that buying such equipment is an expensive venture, and quite a few enterprises can avail enough cash on hand to facilitate the purchase. This being the case, most business owners ought to be prepared to secure financing (partial or full) from a lender. Securing a lender should not be a challenging task as there are plenty of firms offering asset financing. 

What Business Owners Need for Asset Financing 

Similar to any business loan application, you (the potential borrower) will have to provide the lender with financial statements, profit and loss documents, a three-year record of your venture’s tax returns, and the balance statements. 

Your firm’s credit score plus all the information you have supplied will be used to asses the financial health of your business by the lender. Additionally, the lender will also consider your firm’s current cash flow, repayment history, industry risk, and the duration your firm has been in operation. 

The interest rates your lender sets will be determined by a variety of factors including your company’s creditworthiness and the cost of the equipment you intend to purchase. In most cases, the interest rate can be pegged somewhere between 8%-30%. 

In certain situations, the asset to be purchased can be used as collateral. When visiting a lender, it is recommended to bring a quote from a vendor as this will help you certify how much you will need to borrow. For instance, if your business needs any pole mounted transformers, you will have to bring a quote from the equipment vendor or distributor 

If you are looking to get a good deal, it is advisable to purchase surplus equipment from the government as this can save you a lot of money. When the government has surplus equipment, foreclosed property, and seized goods, it will always sell these items to the public on an “as is” basis even if the item has never been used. Regularly checking government websites for such offers might do you the outsourcing trick. Even if you borrow money to pay for the equipment, you will make considerable savings since the equipment will be more expensive in the open market.

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