Construction Equipment Financing 101
If your company is looking for construction equipment financing, there are two main choices, loan or lease. Business owners need to weigh all options when it comes to obtaining financing for construction equipment. Both options have their merits and their drawbacks.
Construction Equipment Purchased With a Business Loan
Equipment used in the construction industry in most cases will not become obsolete during the life of the technology. For years, bulldozers, backhoes, and other construction equipment have endured. You don't see a lot of changes in heavy equipment because they are a time-tested technology. When maintained properly, it will last for years for the construction company owner.
Also once the business loan is paid off, the business owns the equipment. The business gains collateral as it builds accrued equity. This can be very valuable for future financing on the business credit. Equity built used in the collateral gained can be used to obtain working capital in the future. Keep in mind however, that unsecured business lines not requiring collateral are available for businesses needing the extra working capital. Furthermore, the equipment that is bought can be counted on taxes as depreciation.
The Benefits of a Leasing Construction Equipment
The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is particularly true in a "true lease" where there is 100% deduction on taxes. 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.
The thing about a true release is that the business owner can claim the entire lease payment off on business taxes, 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.
The fact that you can often get the equipment that you need without any down payment is one of the primary benefits to some. Businesses, like start-ups, that are not flush with cash love this aspect if they can find it. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.
Plan Early for Your Construction Business
Whatever course you select, you need to consider where you need to put the money, the long term effects, how much you will save in terms of tax breaks and more. Think long and hard about the long term goals of your construction company.
Construction Equipment Purchased With a Business Loan
Equipment used in the construction industry in most cases will not become obsolete during the life of the technology. For years, bulldozers, backhoes, and other construction equipment have endured. You don't see a lot of changes in heavy equipment because they are a time-tested technology. When maintained properly, it will last for years for the construction company owner.
Also once the business loan is paid off, the business owns the equipment. The business gains collateral as it builds accrued equity. This can be very valuable for future financing on the business credit. Equity built used in the collateral gained can be used to obtain working capital in the future. Keep in mind however, that unsecured business lines not requiring collateral are available for businesses needing the extra working capital. Furthermore, the equipment that is bought can be counted on taxes as depreciation.
The Benefits of a Leasing Construction Equipment
The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is particularly true in a "true lease" where there is 100% deduction on taxes. 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.
The thing about a true release is that the business owner can claim the entire lease payment off on business taxes, 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.
The fact that you can often get the equipment that you need without any down payment is one of the primary benefits to some. Businesses, like start-ups, that are not flush with cash love this aspect if they can find it. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.
Plan Early for Your Construction Business
Whatever course you select, you need to consider where you need to put the money, the long term effects, how much you will save in terms of tax breaks and more. Think long and hard about the long term goals of your construction company.
About the Author:
Need money for your construction business? Wall Street Capital Financing can help! Read more at Financing Construction Equipment.
posted by Credit Counseling at
12:37 PM
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