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1 How to Use Construction Equipment Loans to Start a Business

How to Use Construction Equipment Loans to Start a Business

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Setting up a construction business can be a risky and expensive affair. Equipment purchases form a big part of the initial investment into the venture. Most construction businesses choose to take a loan in order to fund the acquisition of the equipment. And these loans can easily help you start your construction business even if you only have limited funds to spare.

1

Use Business Funds More Efficiently

Since you don’t need large funds to purchase the equipment, you can easily start your construction business with a limited amount of capital. And even if you do have a large enough fund, you will now be able to better utilize it towards the growth of the business rather lock up capital in a fixed asset.  For example, if your capital is $100,000 and you need to get equipment worth $50,000, then it is better to obtain it through financing. This way, you can use your monthly revenues to pay for the equipment rather than losing $50,000 from $100,000.

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Equipment Is Collateral

If you have been concerned about not having any collateral to obtain finance for the equipment, you don’t need to worry about it anymore since you won’t have to provide any collateral. Instead, the equipment you are buying will be the only collateral required for the loan. In case you default, the lender will simply repossess the equipment, sell it off, and recoup the loan from the proceeds. As such, you don’t have to stop yourself from starting the business just because you don’t have a valuable asset that could be provided as a collateral. Just approach an equipment financing company since they have the knowledge and experience required to help you set up your business.

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Save On Taxes

A major concern when starting a construction business will be the payment of taxes, which can actually eat into a big chunk of your profits. However, equipment financing helps you deal with the issue for the first few years. There are tax laws which will allow you to fully write off the purchase price of the equipment either within the year of acquisition or over the course of several years. Section 179 of the Tax Cuts and Jobs Act of 2017 allows businesses to instantly deduct up to $1 million from qualifying equipment purchases. The limit for such overall deductions are set at $2.5 million.

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Attractive Terms

Leasing companies like Trust Capital offer very attractive terms for startups looking to acquire construction equipment. For one, they provide 100% purchase financing with up to $300,000 funding offered for one page applications and up to $50,000,000 on offer for people who apply with financial disclosures. Flexible payment terms allow you to repay in 12 to 84 months. Both new and used construction equipment will be funded by the company. Once approved, the company can provide funds within the next day.

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2 Applying For the Best Construction Equipment Financing

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Applying For the Best Construction Equipment Financing

If you are venturing into the construction industry, one of the things you need to arrange for is construction equipment. The ideal way to acquire the equipment will be through a financing option since it will allow you to preserve the capital. Below, we will look at a few things you need to keep in mind when applying for construction equipment financing that will give you the best chance of being approved for it.

1

Dealer Financing

When you are interested in purchasing a particular equipment, check whether the dealer has any agreements in place with lenders to provide equipment financing to customers. If so, then this is probably the fastest way to get a loan for the equipment. Just make sure that the interest rate charged by the lender is not excessively high when compared to other third-party lenders.

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Quick Approval

Getting approval for an equipment lease is a quick affair. Most equipment leasing companies will approve your application within a day. Some companies can give an approval in just a matter of hours and fund your equipment acquisition the very same day. So, you don’t need to worry about waiting a couple of weeks or months in order to acquire the equipment you need to run the business. Just keep in mind to fill in the application truthfully and offer all the information that they ask for to ensure speedy approval.  This will include the details of your business entity, the equipment you wish to acquire, the cost of such equipment, and the vendor from whom you want to buy the equipment.

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Warranty

Apply for construction equipment that provides the longest possible warranty. The fact that the equipment they are funding will be covered under the manufacturer’s warranty for a long period of time in case of any malfunction will provide the lenders with enough confidence to approve your loan. Equipment which only offers limited warranty may be harder to get financed. Equipment leasing companies will include financing the warranty for you.

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Know About The Soft Costs

When you seek financing for equipment, there will typically some soft costs that are attached to it that you might not consider during your initial estimation. These can include costs like shipping the equipment, installing it, hiring trainers, and so on. All such costs can add up to a pretty significant amount. If you had opted to take a loan from a bank for acquiring the equipment, you would have had to pay such costs from your own pocket. But with equipment leasing, you can generally get soft costs included in the equipment leasing agreement, which means that the leasing companies will bear such costs. However, some equipment leasing companies may not absorb such costs. So, make sure that you enquire about whether the company will pay for soft costs before signing an equipment leasing agreement with them.  

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Good Brands

When applying for equipment finance, ensure that it is for an equipment from a well-known brand. This will increase the chances of receiving the loan. Lenders will be apprehensive about providing you money if the equipment brand you have chosen has a history of manufacturing substandard products since this would put the lenders at risk in case they have to take back and sell off the equipment when you default.

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3 Tips for Marketing Your Construction and Contractor Business

Tips for Marketing Your Construction and Contractor Business

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Running a construction or a contractor business can be a hard task. Everything from marketing your services to acquiring clients requires a good deal of effort. However, there are ways you can make this work easier. And below, we look at a few tips which you will be able to market your construction and contractor business more effectively.

1

Decide Your Niche

Decide which niche of the construction industry you wish to focus on. Though you can focus on every type of construction, it would be better for your business if you have a specialization that will make your venture start out. It is easier to get clients when they know that you are not just any construction company, but a construction company specialized in building condominiums, shopping malls, beachfront properties, and so on.  

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Participate In Expos

Usually, you will have to approach potential clients in order get them as your customer. But in expos, it is usually the reverse – the clients approach you for more information about your business. As such, expos offer a simple way to sign up clients without much effort. Just make sure that the presentation you give at the expo is top-notch and capable of impressing even the harshest of clients.

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Support Community Events

People like to support businesses that are known to help the community they are located in. As such, it is recommended that you start participating in community events that will get your construction project a good exposure among the public. For example, if there is a program that is making people of your city aware of cancer, support the cause. Let your brand name and identity be plastered on all their materials. Knowing that your venture supports a noble cause will guarantee that the public has a positive image of your construction business.

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Sign Up For Industry Associations

Joining up with a reputable industry association can offer you several benefits. For one, you will be able to develop networks with people that can help your business in the future. Secondly, you will be able to display that your business is a member of this very reputable group. This will make it much easier for you to market your construction venture and get more clients since people will trust you more because of your involvement with the association. In addition, most of these associations also provide very useful marketing resources at cheaper rates.

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Get Online Exposure

Just resorting to offline marketing methods like billboards, TV adverts etc. is insufficient in this digital age. You should keep aside a good portion of the marketing budget to promote your business online. One way to gain online exposure is to list your firm in all local business directories. This way, when anyone searches the directory for a construction firm, your business will be shown in the results. You can also use pay per click campaigns and advertise your business on Google. This is an excellent way to target customers who are likely interested in your offerings. However, this will require deep knowledge of online advertising tactics. As such, it is better to outsource online advertising to a reputable digital marketing company rather than trying to do it yourself.

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4 Increase ROI Through Construction Equipment Leasing

Increase ROI Through Construction Equipment Leasing

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When checking out the various equipment financing options to acquire construction equipment, one of the main considerations would be the Return On Investment (ROI). And when one seriously looks into the financial aspects of construction equipment financing, the ROI does look very good.

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Preserve Capital

A big concern of every business is to use its capital efficiently. As far as acquiring machinery is concerned, construction equipment financing will allow you to preserve your capital so that it can be more for more productive purposes. For example, if an equipment costs $20,000, you can avoid committing $20,000 from your capital into it. Instead, that money can be used to boost your online advertisement, which can end up bringing in more clients, thereby offering a far better ROI for the $20,000.

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Tax Benefits

If you are taking an FMV or TRAC lease, then you can claim 100% tax deduction. However, for a $1 buy out lease, 10% PUT lease, and other equipment finance arrangements, section 179 will apply when it comes to tax deductions. Section 179 allows business owners to deduct the purchase cost of equipment from their revenues. The amount you save in taxes has the potential to easily exceed even the payments for the equipment, offering businesses a great advantage. With a Fair Market Value (FMV) lease, the monthly payments become 100% tax deductible. The same is the case with a TRAC lease. Both options also allows for equipment depreciation to be applied in the account books.  The deduction limit for Section 179 has been set up to $1 million. Equipment purchases up to $2.5 million are eligible for such deductions.

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Cut Down Equipment Acquisition Time

If you had decided to buy the equipment from your own funds, it might have taken a long time to make the purchase, especially if you were already short of funds. And during this time, your only option would have been to run the business with whatever machinery you possessed. It would have resulted in higher costs and lower profits. With construction equipment financing, you can have the machinery you need within a short time, which ensures that you don’t end up racking up unnecessary costs due to non-availability of the required tools.

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Equipment Upgradability

Acquiring equipment through equipment financing also provides one big advantage – easy upgradability. If you had bought the equipment using capital, you would have been stuck with the machine for a long time.  In contrast, an equipment lease can allow you to acquire new and advanced equipment according to your needs by ending the existing lease and taking a new one. As such, when a new equipment is released that produces more output and has a lower operational cost, you can actually acquire it and benefit from it. And this is what makes the ROI of equipment financing a very attractive factor. Be sure to negotiate a good early pre-payment option with your equipment lessor.

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Rental Costs

When you take an equipment lease in the name of your business, the monthly repayments will be recorded as rental payments. This gives equipment leasing an incredible financial advantage over outright purchase. For example, if you are required to pay $2500 for renting an equipment, the amount will be deducted from the revenues before you are required to pay taxes on the profits. In contrast, if you had bought the equipment from the business funds, then the accounts will merely shows a reduction in capital. There is no ‘rental’ amount you can deduct from the revenues.  Now, this benefit is only applicable for an FMV or a TRAC lease. If you take a $1 buy out lease or a 10% PUT option lease, then this advantage will not be available.

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5 Construction Equipment Financing and Purchasing Scams

Construction Equipment Financing and Purchasing Scams

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While equipment financing offers you one of the best ways to acquire the necessary tools for your construction business, you need to be very careful about not getting yourself trapped in shady schemes. There are many fraudulent businesses that specifically run construction equipment financing scams to steal your money. And in this post, we will expose a few such scams.

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Low Rate Scams

When researching about equipment financing options, you will likely come across advertisements that say that they offer ridiculous rates ‘as low as 3%’ or something similar. At first look, these rates will seem incredibly attractive and unbelievable since other lenders are quoting higher rates. But remember that if something appears too good to be true, it probably is. If the lender is quoting a monthly payment or interest rate that is far lower than the average quotes of other reputed lenders, then that is definitely a red flag that it is a scam. As such, stay away from such offers as much as possible.

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Advanced Fee

Some financing companies will ask that you deposit a certain amount of money prior to getting approved for the loan. This demand can run into thousands of dollars. It is advisable that you be very wary of such lenders. In all probability, they will just collect your money and vanish. And in case you are able to find them, they’ll try to wriggle out from repaying to the deposit citing unreasonable clauses. If you had signed an agreement that abdicated your right to collect back the deposit, then you will never be able to get the money back. However, some lenders do require you to pay up a few hundred dollars as processing fee. This is a reasonable demand that you will have to meet. Just watch out for lenders who ask for thousands of dollars as a deposit.

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Evergreen Clauses

This is a scam you should seriously watch out for to avoid suffering huge losses. An evergreen clause is basically an extra clause added to the contract by the lender which will make you pay the monthly installment for several more months after you have actually paid off all dues. For example, you may have to pay $20,000 in 2 years under the contract. But if the equipment lender adds in the evergreen clause that you will have to pay for 6 months more after the end of the second year, you will essentially be forced to pay $5000 extra. So be sure to put in writing what your intention is at the end of the equipment lease. Either to return the equipment or buy it at the end so you don’t get stuffed with an evergreen clause. It’s wise to send this via email and certified letter as soon as possible after you sign up for the lease and no later than 90 days before the lease ends.

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Changing The Contract

Some lenders will agree to a contract verbally and then send a paper contract that will be opposite to what has been agreed upon. For example, a lender might agree to the $1 purchase option contract where you will own the equipment at the end of the lease period by just paying $1. However, when they send in a paper contract, the words might state that you will have to pay 10% of the market value of the equipment to actually own it after the term period. The lender will be betting that you may not read the contract fully before signing it. As such, always take your time to read up the contract in full at least twice. Only when you are satisfied that the contract is as per your expectations should you sign it.

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6 Options of Bad Credit Companies Applying For Construction Equipment Loans

Options of Bad Credit Companies Applying For Construction Equipment Loans

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When your business needs to get some construction equipment for a new project, getting funds to acquire the same can be pretty tough in case your credit rating is low. Most lenders will flat out reject you. And even if they don’t reject you, they will only offer the funds at very high interest rates. To help you avoid such scenarios, we list below a few options which companies with bad credit can use to have a better shot for being approved for construction equipment loans.

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Get A Cosigner

The easiest way for a business to neutralize the effect of bad credit on loan approval is by getting a cosigner. The good credit position of the cosigner can be used by the lender to approve your loan. And that too at a very reasonable rate. But do keep in mind that the cosigner will also become liable for the loan. So, if you become insolvent and unable to pay the loan, the lender will collect payment from the cosigner.

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Big Down Payment

Usually, equipment financing does not require any big collateral. But since your credit position is weak, the lenders will have trouble believing that you will be able to pay off the loan. A good way to allay such fears is by providing a big down payment, say 30% of the purchase price. This would make the lenders have confidence in your repayment ability, thereby improving your chances of being approved for the funds.

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Collateral Assets

If you have valuable assets in your business, you can also use them as a collateral for secure the equipment financing. For example, the land in which your business is located may be highly valuable. By offering it as collateral, the lenders can be assured that they will be able to recoup their loan in case you default and the sale of the equipment is unable to fully compensate for the loan.

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Make A Strong Business Case

Your credit rating may be bad as of the present moment. But if the business has received large orders that guarantee long-term revenues which can easily cover the repayment of the equipment loan, then you should appeal to the lender to judge you on your future potential earnings rather than the past financial position. And though some lenders may still be wary of lending you money, experienced lenders who have been in the industry for long may be more willing to fund you. However, you will be charged a higher interest rate for the loan since the lender is taking an additional risk by funding you.

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Sale Leaseback

In case a business already has some equipment, they can do a sale leaseback on it. This will involve selling off the existing equipment to a financing company and leasing it back for monthly repayments. The cash inflow from the sale will go a long way to improve the financial position of the business. You can repay any outstanding debt and improve your firm’s credit rating, which will allow you to take out fresh loans for acquiring new equipment.

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