Streamline the equipment financing process to focus more on operations
by Eric Freeman
January 29, 2015

When it comes to acquiring the equipment that construction companies need to conduct business, the options for securing capital for purchases and leases are endless. From local banks and national credit unions, to loan brokers and even equipment finance specialists, there are several avenues available to complete the financing process and obtain the equipment that construction businesses need.

The caveat, however, is that construction company owners are busy. For that reason, owners need a streamlined solution to help make the equipment financing process as painless and efficient as possible.

Below is a list of several options available for construction companies seeking the best fit for their individual financing needs.

Option 1: The Typical Bank

Many construction company owners can obtain financing from a local bank, especially when the company is in its infancy. Construction companies with good credit can typically get approval for the small business loans necessary to buy or lease equipment, regardless of the age or size of their businesses. The issue most construction companies face with typical banks is that, when their companies expand and their financing needs subsequently grow, the bank can no longer fulfill their financing needs.

While a typical bank might be the perfect provider of a $1 million loan on a crane, these institutions are less likely to provide multiple loans or loans above the $5 million mark.

This is not to say that a construction company couldn’t secure different lenders for several loans, but this process would require an enormous amount of time and paperwork, keeping a company owner from focusing on business or
current construction contracts.

Option 2: A Loan or Lease Broker

Because time really is money for most owners, many look to brokers to find the financing they need for equipment purchases or leases. Brokers can be fantastic partners for companies looking to finance equipment for large amounts, and they have the advantage of identifying options outside of typical banks.

That said, the options to which brokers have access can still be limited. While there are many finance institutions that have programs set up for heavy equipment, these programs are often only set up for specific equipment types that act as valuable collateral in case a deal goes sour. While brokers have access to more than just the small loans that typical banks have to offer, the types of equipment they can finance can still be an issue.

The problem across the board is that most financial institutions do not understand the value of certain types of equipment—especially the smaller, often technological components that make up a larger construction equipment purchase. For that reason, even the best broker is not always able to arrange the financing needed for construction equipment.

When using a broker to secure financing, owners should keep in mind that when the financing is complete and the deal is secured, the broker is often finished with that deal as well. This means that owners must then deal with their lender directly for payments and any issues moving forward, which is sometimes a less than seamless process.

Nonetheless, brokers can be a strong option to provide owners with a one-stop shop in terms of engaging with lenders and are often the best solution for construction company owners who are looking for a large loan or lease for
standard equipment.

Option 3: A Specialized Equipment Finance Professional

A specialized equipment finance provider can usually offer construction company owners the best of both worlds—the personal service and convenience of a local bank combined with the time savings and higher levels of finance available through a broker. When working with an equipment finance company, owners should look for a partner that not only brokers deals through other lenders, but also has its own money to lend. These specialized lender/brokers have the advantage of deeply understanding the specific equipment and its collateral value. They know which outside lenders also understand the construction industry and can work to achieve the best deal possible.

When these specialized equipment finance companies cannot find an outside lender willing to finance a specific product type or deal, they have their own money and can provide construction companies with specialized funding to complete their lease or purchase.

In addition, these equipment finance companies often service their own loans. Unlike a traditional broker, equipment finance companies service the secured loan and continue to work with a borrower throughout the life of the loan.

While there are many options available today for construction companies that are in need of financing for an equipment lease or purchase, the avenue a company owner chooses greatly depends on that company’s individual needs.

While a typical bank will be an excellent choice for a small loan to a small company, a broker may be the answer after that same company grows and needs more capital.

For busy construction companies in need of a more streamlined approach, or for those who need to finance large amounts of equipment, a specialized equipment finance professional is the best answer.

The bottom line is, construction business owners should educate themselves on the options available for achieving financing, and focus on finding the best solution for their businesses. By streamlining the process, owners will ultimately be able to keep themselves where they belong, in the field, running their businesses.