11/15/18

Best Construction Equipment Financing Options for 2019

The construction industry has consistently been ranked among America’s fastest-growing industries, and 2019 is expected to be no different. Simply check out the latest data from Sageworks and you’ll notice that multiple construction fields make the top 10 list.

Of course, with growth comes the need to scale. And with the need to scale comes the need to equip. So when your construction business requires new equipment, financing often becomes a necessity. After all, the costs of materials and equipment have been steadily climbing for the past couple years (and show no sign of leveling off).

On top of that, many big banks are becoming gun shy when it comes to funding construction projects. So if you’re seeking financing, what do you do? The first option for many construction businesses considering equipment financing is equipment financing. Sounds perfectly logical, right? Like how you would most likely choose a bicycle for a bicycle ride or a bed for bedtime.

But don’t be deceived by the apparent simplicity of the whole thing. While equipment financing can definitely be a solid option, it is certainly not the only option. Let’s take a look at a handful of the various financing routes you can take.

Equipment financing

As mentioned earlier, this type of financing can be used to purchase a wide range of tools and resources for your business. Examples include excavators, dump trucks, table saws, trailers, and jackhammers. Lesser-known options include software tools for your office, such as a new accounting program or task management platform.

Equipment financing is fairly easy to qualify for as long as you’ve been in business for a year or more, have $50,000 in annual revenue, and have a credit score of 650 or higher. Costs vary, but you can usually find favorable rates. And the equipment you’re buying can even be used as collateral, which can potentially eliminate the need for a down payment.

Business credit card

For smaller purchases, business credit cards can be a popular option. The maximum amount is usually in the $500,000 range, so you definitely won’t be able to go out and buy a Bagger 293. But if your needs are more modest, consider going plastic.

For one thing, a business card isn’t a loan. That means if you’ve been turned down for loans in the past, this could be just the ticket. You’ll just need a credit score of 680 or higher. And be aware that if you haven’t been in business very long, you may be required to personally guarantee the card.

Once you’ve received your card, you’ll have fast access to cash anytime you need it. And you’ll be building your credit and benefiting from card rewards programs in the process.

Line of credit

Like a business credit card, a line of credit is not a loan. Instead, it’s a flexible form of financing that lets you access the cash you need, right when you need it.

Rather than take out a lump sum at the onset, which you’re then obligated to pay back, your line of credit is simply available when you need it. So if you need $3,750 to fix your bulldozer, just take out $3,750. Once that money is repaid, you’ll be all squared away and have the full credit amount again available for you to borrow.

To qualify for a line of credit, you need to have a credit score of 560 or higher. And lenders will prefer you to have been in business for at least six months and be bringing in $50,000 or more in annual revenue.

Term loan

Here’s a popular loan option that has helped many construction businesses. Term loan amounts can range from $5,000 all the way up to $2 million, so it can help fund even your larger expenses. And the interest rates can be as low as six percent.

The beauty of term loans is their flexibility. You can use them to buy a new cement truck, but some of the money could also go toward hiring more workers for your crew. You’ll just make regular payments over the term of the loan, which range up to five years.

Short term loan

This type of loan shares a lot of DNA with term loans. But as the name suggests, it’s done on a shorter timeline. So instead of a five-year term, these puppies range from one to three years. And you can get your cash in as little as 24 hours, which is why short term loans can be an ideal solution when you’re in a pinch.

Of course, speed almost always comes with a price. Short-term loans typically have higher-than-average interest rates and are among the most expensive loans on the market. And the maximum loan amounts are much lower than with a standard term loan. But if you find yourself in a situation where rapid access to money is worth the added cost, a short-term loan can be your best friend.

It takes a little cash to change the world.

So what are you waiting for?

About the author

Grant Olsen
Grant Olsen
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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