I know that you know that getting a crane for your business is no quick and easy purchase. It’s an expensive, but tremendously powerful piece of equipment to have in your arsenal of business tools. But as a new business owner you might not realize the major differences between crane finance and crane leasing.
I’ll help you understand the major differences so that you can make the best choice as you plan to purchase a crane or upgrade to a newer crane or rough terrain crane for your construction business.
Crane Finance and Crane Leases Have the Same End Goal
Whether you choose to lease a crane or get a loan to purchase a crane, the end result is ultimately the same: you get access to a crane without having to pay the entire cost of the crane upfront. Most companies, even some successful construction firms, don’t have that much cash on hand to just buy a crane upfront without financing.
How you go about paying for access to the crane is where the major differences are between a lease and crane finance. Both require you to make monthly payments for a set period of years. The benefit of using crane financing leasing or loaning is that you can stretch the cost of a crane out of a long period of time, making it more manageable to pay off.
Crane Leasing Options
If you choose to lease a crane, you are essentially “borrowing” the crane, getting to use it for all of your company’s construction projects, without having to technically purchase it upfront. Over a period of years, you’ll make regular monthly payments that go towards “purchasing” the crane. At the end of your repayment agreement, you’ll have the option to finish purchasing the crane to own it in all technicalities.
Depending on how your payment structure is established, you may have a large “balloon payment” due in order to finish off the crane leasing agreement, which you can likely now afford because you were able to take on more significant projects with the help of your fancy new crane.
So! On the flip side, you could choose not to buy the rest of the crane, return the crane and instead lease a new, different model. This could benefit you if you would like to try different models before making a final purchase, or if you want to upgrade to a larger and more powerful model.
Keep in mind... Crane Lease rates for crane operators can get very low, even negative lease rates, if an established crane lessor will place a residual value of 10-20% on the end of the equipment lease. The would be set up as a true operating lease or as a TRAC Lease for cranes.
When you structure your crane purchase as a TRAC Lease or FMV buy out you can write off 100% of your payments off your taxable income. It's important to remember as soon as you know that you're going to exercise your purchase option at the end of the lease to send a letter via email and in writing to the lessor so your lease term doesn't get auto renewed.
When you go to buy out of a crane lease set up as a TRAC lease or FMV buy out lease you lose the idea of buying out early and only paying the remaining principal. For no early pre payment penalties you'll want to turn to crane finance.
For most crane finance solutions, you’ll go through a banking institution or heavy equipment leasing companies to finance a crane and set it up on a $1 buy out lease or equipment financing agreement. There are many crane leasing companies in the equipment finance industry. In order to successfully navigate through the application and qualification process at a local bank, you’ll need some high business credentials. Like the usual: high credit scores, multiple years of experience, high values of company assets and funds, and more. You don’t always need near-perfect business stats to get a loan, but in most cases you do need to show strong business financials to get approved for crane finance at a local bank.
In many cases, getting crane finance through a local bank or private equipment lenders is a good option, simply because the crane rates end up being about the same as at local banks as they're at most heavy equipment leasing companies that specialize in financing cranes, but the major downside with local banks is that the qualification process can take a long time and you may still not even get the funds if you don't have perfect credit.
As a business owner It's a good business decision to leave your bank loans available for things to buy that aren't equipment related but are things that appreciate like hiring good employees, marketing, etc. Then use equipment finance companies that specialize in crane finance do what they're good at and finance cranes.
With most crane equipment financing companies, crane Loan rates for established business owners over three years can start at 4.75% and lease terms can go up to 84 months. Many times these monthly payment terms are more attractive to own the crane if you can get qualified, than doing a crane rental. It's much nicer having your own crane ready to go when you get the job, instead of hunting for one and possibly losing the job if one isn't available.
The more crane credit a start up crane operator can develop before having years in business will come back to reward the crane operator. Crane equipment financing is very beneficial for future growth. Once you scale your crane operation you could be seeking crane loans in the million dollar range and in order to get the large crane loan approved you'll have show a good payment history on smaller crane finance loans in the couple hundred thousand purchase range.
It all starts with an online application and when you're ready to Apply online for a crane finance Loan feel free to call Trust Capital and speak with a crane finance specialist that can take your application over the phone at 866-458-4777. We can give you a no obligation approval that's good for sixty days so you can go shopping for a crane from any crane manufacturer, crane dealer or private party. Trust Capital can finance used cranes from auctions and even finance soft costs such as delivery, taxes and maintenance agreements.