You should always be searching for the most effective and most efficient way to approach any financial decision. It’s just a smart move overall. Most businesses owners already know this, though, so that’s nothing new.
But for construction business owners that might not have a lot of experience yet or are just starting out, it can be confusing at first understanding the best ways to finance a crane.
What crane finance options are even out there, anyway? Is there one tried-and- true answer for crane finance? Who can I talk to about my unique business situation?
These are common questions, so if you have uncertainties about how to go about getting an approval for crane equipment financing, you’re not alone! We’ll look at a few key things about crane finance and which option might be best for you and your situation.
Purchasing a Crane with Cash
Arguably one of the best ways to go about crane finance is to not need financing at all! If you're a millionaire and have cash on hand, paying upfront means not having to pay any interest on your crane financing.
Although, we know that most business owners don’t just have thousands upon thousands of dollars in cash just laying around, waiting to buy a rough terrain crane.
And that’s why crane finance is so common when purchasing an all terrain crane.
Using a Bank to Finance a Crane
Okay, so we know that paying with cash upfront is usually a no-go for most business owners. That’s standard for most businesses, so don’t worry.
The next best option for you is going to be going to a bank to get financing. Crane finance through a traditional bank may be able to net you better monthly payment rates. The downside to going to a bank however is that you’re not likely to be able to secure a deal at all with most banks.
The only way you’ll be able to manage getting crane finance through a bank is if your personal or bank financials are on-point and you have a lot of time on your hand. And if you’re a new business owner or looking for funding ASAP, then a bank is probably not the best route for you. It might be a “great option” for crane finance, but that’s only under ideal situations.
So let’s move onto a crane finance option that’s suited for the general population of business owners: Crane Leasing.
Using Crane Leasing to Finance Your Crane
Now we’re to crane leasing, which is a popular form of crane finance that many business owners across the country utilize on a regular basis. There are a few good crane leasing companies that specialize in crane leasing. In most cases, leasing is great for different kinds of business owners who are in different stages of businesses. From businesses who are just starting out to more experienced business owners who want to capitalize on an opportunity in the market.
Crane leasing is similar to getting a loan or buying a crane outright, but financially it’s structured in a different way.
To start, when you lease a crane, you get to use the crane almost immediately and can operate it “as if” you own it, even though during the lease it’s not technically yours - yet.
Each lease will be different for each business, but typically you’ll have monthly payments for anywhere between 1 - 7 years to “pay off” the cost of the crane.
Leases are unique when it comes to getting heavy equipment because you have different end results based on your long term goals.
If you want to keep leasing the crane for another term, you can.
You can also choose to “buy and own” the crane by making either a $1 payment or balloon payment, depending on how the deal was structured initially.
With a TRAC lease or FMV lease you can choose to simply give the crane back at the end of the lease term, which is a great option for businesses that want to upgrade to a different model, try out different cranes, or for businesses that simply don’t need a crane any longer. Depending on crane leasing rates, these two structures typically give a lower monthly payment than a $1 buy out lease.
All the crane leasing companies have a different pre payment policy, so be sure to ask about it up front to structure your lease term to where you think you can afford. The shorter the lease term the less total out of pocket cost. A 36 month equipment lease is the smartest lease term to choose because it keeps your total out of pocket low and keeps your monthly payments manageable. If you think cash flow will be an issue than be sure to stretch the lease term out to 72 months.
Using crane finance in the form of a FMV buy out lease or TRAC Lease comes with the advantage of being able to write off the crane payments from your taxes. This directly impacts the bottom line of the business, and in a way translates to better profit for you and your staff.
Use our crane loan calculator to calculate how much your crane equipment financing payments could be and use our crane lease calculator to calculate how expensive of a crane you can afford to lease based on your monthly budget.
Figuring Out the Best Crane Finance Options
As you can see, there’s a handful of options available to you to get crane finance. Finding the options isn’t particularly hard, but the challenge is figuring out which is going to be the most effective or more financially efficient for you.
What it really boils down to is the amount of time you’ve been in business, credit score, and the amount of funds you can put forth to secure a deal.
How to Qualify For Crane Equipment Financing?
The longer you’ve had time in business, the more “secure” crane leasing companies feel about working with you. Expect to have been in business for a minimum of 2 years time in business before you’re considered more than just a start up crane business looking for crane equipment financing.
Credit score is another major financial aspect that financiers providing crane finance are going to be looking at. Credit score is used to assess the level of risk and your capability to make your payments. Naturally, the higher your credit score, the better your chances are and the better your monthly rates will be, too.
If you have collateral you can put up for the deal, you’ll greatly increase the chances of being able to secure any kind of financing. Collateral is a great “catch all” for business owners that are new and/or don’t have perfect credit score.
Generally speaking, if you have the patience to get crane financing through a bank and have over three years in business, over a 700 fico score, near-perfect financials, then structuring your agreement as a loan such as an equipment finance agreement or sales contract is going to be your best option. A bank can offer a no pre-payment penalty loan for a crane.
But for most business owners out there, getting a lease is going to be the best option. Even if it’s marked at “3rd” out of 3, that’s not to say that getting a lease is a bad option. It’s far better to be able to have access to a crane using crane finance options and get to still write payments off of your taxes, than to not be able to use a crane at all!
Get started with an online application or if you're not ready to Apply online for a crane finance loan we invite you to call Trust Capital and speak with a crane equipment financing specialist 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 crane soft costs such as delivery, taxes and maintenance agreements.