Construction Equipment Financing Tips

by: Roger Kelley


The Low Down On Construction Equipment Business Loans

Construction equipment will last a long time, and does not become obsolete over time. For years, bulldozers, backhoes, and other construction equipment have stood the test of time. You don't see a lot of changes in this type of equipment because they are a time-tested technology. When maintained properly, it will last for years for the business owner.

When a business owner uses business financing to pay for construction equipment, the business owns the equipment once it is fully paid off. The business gains collateral as it builds accrued equity. This can be very valuable for future financing on the business credit. This equity can be used later on down the road to help secure working capital if the need arises. However, we have found that unsecured lines of credit offered the small business person all the extra working capital they need, with requiring collateral. Furthermore, the equipment that is bought can be counted on taxes as depreciation.

The Benefits of a Leasing Construction Equipment

The top reason most business owners lease construction equipment is the fact that it offers great tax benefits. This is especially true in terms of what is called a "true lease", where you get a 100% deduction. If you do not know what we mean by a true lease, the Internal Revenue Service uses the term "true lease" to define how it is structured.

When the lease is structured as a true lease, the end-user can claim the entire lease payment as a business expense. To qualify for this status, the equipment must be declared at fault fair market value at the leases end. While all this sounds complicated, it really isn't. We do, however, recommend consulting with a professional tax consultant for more information on the ramifications of the tax benefits of leasing.

Most business owners like the notion of using a lease because you can get the equipment without a down payment or very little at all. So this eliminates the upfront costs involved in buying your own equipment outright. This makes it much easier on businesses that are startups especially. Lease agreements are fixed for the term of the contract and therefore give the business owner a solid figure on payment amounts.

Choose The Best Route For Your Construction Business

As a business owner, there are a lot of things to think about when purchasing construction equipment. One of things is the method of payment and how it affects you financially with taxes and everything else. Make sure you check the all angles and consult with a tax consultant Think long and hard about the long term goals of your construction company.