Construction Equipment Finance | Significant Industry Expansion Expected
Midvale, Utah, August 1, 2016 (Newswire.com) - Dallin Hawkins, Director of Sales & Operations - Integrity Financial Groups, LLC
Significant Industry Expansion Expected for the Construction Equipment Finance and Mining Equipment Finance Sector.
The worldwide mining and construction equipment finance sector will grow by an estimated 9.9 percent over the next four years, according to a report based on market analysis and input from industry experts.
Driven mostly by accelerating demand, expanding firms will outnumber contracting firms by almost a two-to-one margin during the growth period. Additionally, many financing companies and investment banks that offer construction equipment finance are forming tie-ups with equipment vendors, to facilitate project financing and quick decision making.
Driven mostly by accelerating demand, expanding firms will outnumber contracting firms by almost a two-to-one margin during the growth period. Additionally, many financing companies and investment banks that offer construction equipment finance are forming tie-ups with equipment vendors, to facilitate project financing and quick decision making. These partnerships often include asset-based loan solutions, along with more traditional semi-truck financing repayment models, like monthly installment payments. The added growth may also exacerbate current shortages in terms of masonry, carpentry, and other skilled positions.
The report surveyed the industry’s largest 355 companies, including Terex, Joy Global, and Komatsu Ltd.
Commercial Truck Financing & Construction Equipment Financing
Large durable goods – the kind used in major construction equipment finance projects, large-scale shipping operations, and other endeavors – nearly always involve a significant expenditure to acquire, even if the commercial vehicles and equipment are used. So, flexible construction equipment finance arrangements are essential if the business is to keep expanding. The reduced capital outlay is a key to expanding in other areas, such as additional employees, additional space, or additional locations.
Lenders want to say “yes” in all these situations, but many business owners in these sectors, especially smaller operators, need flexible construction equipment finance arrangements, including:
- Balloon Payments: These construction equipment finance options are ideal for businesses that need lower installment payments or are unsure about their long-term needs, since the entire principle is not amortized over the loan term and, in lieu of refinancing the final payment, the lender will often buy back the equipment before it has fully depreciated.
- Fixed or Variable Interest Rates: A static rate is more predictable in terms of budgeting, while a variable rate allows a business to take full advantage of favorable market conditions. A variation on this idea is a stair-step interest rate that starts low and gradually increases; some jurisdictions have special rules about this type of truck financing and construction equipment financing option.
- Prepayment: Many lenders include prepayment penalties in their loans, to protect themselves if the borrower pays off the loan early and the lender is denied additional interest payments. These clauses, like blanket liens and other debtor-unfriendly terms, are nearly always negotiable.
Other nontraditional repayment options include quarterly payments that help improve cash flow and payment deferrals that help manage sudden cash flow crises.
If a lease is a better option, which it may be for a short-term only need or a large, temporary project, it is important to understand that certain types of equipment leases have certain tax consequences. Depending on need, a business can choose between:
- Capital Leases: If there is an ownership transfer or if certain other conditions are met, the equipment is an asset subject to depreciation.
- Operating Leases: Short-term leases are recorded as operating expenses only with no corresponding depreciation.
Most financing companies will offer either option and, depending on the type of loan, perhaps even shift the category depending on conditions, making the lease even more flexible.
Discover Purchase and Leasing Options
To take full advantage of the expected uptick in business, reach out to Integrity Financial Groups, LLC to discuss our construction equipment finance options, by visiting our website or calling 801-386-8222.
Source: Integrity Financial Groups, LLC