Construction equipment often comes with a hefty price tag, so it’s important to consider your financing options carefully. No matter what stage of business your company is in, it’s worth considering equipment leasing as opposed to financing or outright purchasing some or all of your assets. Here’s a rundown of the pros and cons associated with construction equipment leasing so you can choose the best option for your business.
Pros of Construction Equipment Leasing
One of the biggest benefits of equipment leasing is that it requires much less capital than other financing options. Additionally, at the end of your lease term, you often have the option to buy your equipment if you find it satisfactory for your needs. This is a good way to try something new without making the long-term commitment to owning the equipment.
Equipment leasing comes with a quick and easy application process, particularly compared to loans from traditional banks. It can also help your company’s books: the lease won’t appear on your balance sheet so you can keep up your financial ratios. Also, there’s no blanket lien placed on your business because the equipment itself serves as collateral. Lease payments are usually tax deductible as well.
Cons of Construction Equipment Leasing
There are a few downsides to consider with equipment leasing. Generally, you need to adhere to your agreed-upon schedule. If your construction timeline changes at all, you may not be able to get early access to the equipment if needed, and you still have to return the equipment on time. That’s definitely some incentive to stay on track, and it should make you consider adding some buffer time to your anticipated schedule.
From a financial perspective, you also won’t be building equity in the equipment when you lease it. When you hold equity in your construction equipment, you can potentially use it as collateral for future credit needs.
The Bottom Line
Construction equipment leasing can be a strong option if you want to keep your cash flow open. Just be sure to have your scheduling down so you get the right equipment at the right time for your upcoming projects.