Purchasing a piece of heavy equipment for your business is a major decision and can be a big investment. Buying outright is not always an option, which is where business equipment financing comes into play.
Cash flow and business overhead can stand in the way of being able to purchase equipment in full. However, that shouldn’t mean your business should suffer without the heavy machinery it needs. CTC Equipment is a renowned used heavy and construction equipment seller that offers affordable financing options to help more people find the solutions required to get their business going.
In this brief guide to heavy equipment financing 101: We look at the ins and outs of paying for equipment using a good finance option and other considerations when making a decision for your construction business.
Why Buy Heavy Equipment on Finance?
The main benefit of buying heavy equipment on finance is gaining the machinery you need for your construction business without the major expenditure all in one go. Rather than spending thousands just to get started, you can arrange an affordable monthly payment for equipment – just like paying off any other loan.
What Type of Equipment Can You Buy Using a Loan?
You can buy anything from Boom Lifts and Tractors to Engines and other equipment you need on finance. It is more commonly used for high-ticket heavy machinery items but can apply to a range of construction tools and equipment.
Equipment Finance VS Equipment Lease: Which Is Better?
Equipment financing is one possibility, but you can also lease certain things on a short-term basis. If you lease equipment instead of buying it on finance, you only pay for temporary use as and when you need it.
Some of the benefits of leasing equipment without buying it include:
- No long-term repayments
- No need to find storage space for equipment you don’t use regularly
- Access to specialist equipment on demand
- Lower overall cost
There are, however, some downsides to know about.
- Could work out more expensive if you need the same equipment regularly
- Risk of not finding an available item when you need it
- Waiting for arrival
- Sometimes comes with hefty security deposits
Deciding what route to take is often a complicated choice for any businesses, but there are a few key points to consider that help make things clearer.
How Regularly Will You Use the Equipment?
Arguably the most important consideration when deciding whether to lease or purchase the equipment on finance is how often you will actually need it.
If there is a piece of machinery you absolutely need for your business to run, then it makes sense to buy your own. However, buying a piece of specialist equipment that may only be required from time to time may not be the best use of your money.
Compare the overall cost with the use frequency to work out how worthwhile a finance buying option is. If you think it is not worth the investment to buy your own, you can just lease the equipment whenever you need it.
On the other hand, you need to weigh up the cost of paying for equipment on lease over time. How many times would you need to use the equipment before it surpasses the price of buying one? If you think the expense would repay itself within a reasonable time-frame, then maybe you should put it on finance rather than choose a lease payment.
Do You Have the Capital for an Upfront Deposit?
There is always some sort of payment involved at the beginning of an equipment loan- but there are equipment financing options from CTC Equipment that keep it fairly affordable. Look at the down payment amounts for the equipment you need on the loans you qualify for, and decide whether or not it is affordable.
A lease agreement may actually have a higher upfront deposit in many cases. Heavy equipment leasing companies often ask for a large security payment. It is generally returnable at the end of the lease, assuming there is no significant damage or breach of contract- but that doesn’t make it any easier to afford at the time.
Compare the upfront costs of the machinery your business needs via leasing and financing options to work out what path suits you best.
Are You Likely to Be Approved for a Business Line of Credit?
A heavy equipment loan is no different from any other loan- meaning you need to qualify for a lender to provide the capital. Your credit score will play a major role in determining whether or not finance is an option for your equipment purchase.
It may also impact the maximum loan amount and type of loan you can get. Consider if a loan is likely to be an option- and whether or not the monthly payment is something your business can handle.
When a loan is not a viable option, leasing equipment (coming soon!) may be the better option.
Things You Need to Know Before Opting for Heavy Equipment Financing
Financing for used heavy equipment makes it possible for smaller businesses to afford the machinery they need, but it is crucial to weigh options and properly prepare. Here are a few things to think about before applying for a loan.
- Choose the right equipment. Think about the best investment options that will bring the most benefits to your company.
- Make sure all your documentation is in order. Any loan company will want some information on your business financials before approving you for finance.
- Don’t rush through the terms and conditions. Read up on the interest rate, repayment schedule, and minimum payments.
Find the Best Heavy Equipment with Competitive Prices and Financing Options with CTC Equipment
CTC Equipment is a leading used heavy equipment company based in Leamington Ontario and servicing all of North America. We take pride in providing construction companies with high-quality, affordable machinery & equipment and helping them find financing options that work for them.
Explore products and heavy equipment loans designed to make things easier for Ontario construction businesses by call us today. There is no better place to find financing for used construction equipment or to buy reliable second-hand machinery to boost your business.
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