Heavy equipment leasing is very common in the construction sector, where contractors have to purchase exceptionally expensive machinery to complete various projects. This is cash that they are paying out for a piece of machinery that will depreciate in value as it’s used.
While the contractor cannot operate without this expensive machinery, they also don’t want to pay out a large sum of their working capital to complete the job. The solution is heavy equipment leasing, which eliminates the risk involved in a large capital investment.
Before you start looking at how to go about achieving this type of financing and what’s involved, you need to determine the different types of leases available and the advantages that you get to enjoy when considering this financial option.
Once you find a company that can provide you with the financing you need, you will have to determine what type of lease is the best choice for you and your business. Some of the most common options include the fair market value lease, which enables you to purchase the machinery for a fair market price at the end of the lease or return it.
Another option is the buy for one Dollar lease. These leases let you pay fixed monthly amounts over a set period of time and once the lease ends, you have the ability to purchase the machinery for one Dollar.
Then there is the sale leaseback option, which is a great opportunity if you have already invested your capital in the machinery you need and now you need cash in a hurry. This enables you to sell your equipment with the agreement that you can lease it back at an agreed rate. This is often used to raise capital to complete a project.
Heavy equipment leasing offers a host of benefits with the main benefit being the reduction in risks. If you were to purchase the expensive machinery without a lease, you are responsible for the maintenance of the machinery, along with paying out a large amount of your capital, which could be put towards paying salaries and other expenses. It can leave you cash strapped, where the lease agreement offers you financial freedom and flexibility.
You can improve your cash flow by choosing this option. You can budget your payment schedule accordingly, freeing up the cash you would have spent to use elsewhere in the business.
One of the biggest problems faced in the construction industry in the management of machinery. You may have two diggers and a few other items, but as you take on more and more projects you may find that you require other machinery that you don’t current own and your two diggers are sitting in a yard collecting dust. With heavy equipment leasing you only have to have the machinery you need on hand at all times, it’s a great way to reduce the risk of having idle equipment that you don’t need, but is taking up space and costing you money.
What you may not know and something that will make every business owner smile is that heavy equipment leasing comes with tax deductions. Rather than paying a hefty tax bill by purchasing the machinery outright, you can enjoy one hundred percent tax free payments when you take advantage of heavy equipment leasing.
Finally, leasing any equipment does not affect your credit line. If you do need to visit the bank and get a loan to finish a project, you will find that the rental of the machinery will not have any negative impact in any way.