The Benefits of Heavy Equipment Financing
Freeing up capital can sometimes be a hardship for any business owner. During the good times and the bad there is always a need for businesses to have access to money. If you haven’t already heard of Robert Kiyosaki’s book “Rich Dad Poor Dad”, it describes one of the key methods to build long term wealth is to leverage other peoples’ money. Financing heavy equipment is just that. Rather than couching up large amounts of cash out of your own pocket, you can get a loan to purchase or refinance the tools and equipment that are crucial to the success of your business. Continue reading for some of the benefits associated with heavy equipment loans.
Managing Cashflow and Liquidity
We all know cash is king when it comes to operating a business. As the cost of operations and employee compensations continue to rise, your liquidity becomes more and more important. Stretching out the payment on your equipment needs can be one such way to hold on to your cash assets. Especially in the construction, transport and farming industries, equipment costs can be in the hundreds of thousands or millions. When seeking funding for these heavy assets, you may be able to secure a loan that is non-reporting and fully tax deductible. Which means you get the opportunity to put the equipment to work immediately, yet hold onto the cash reserves you need for other business expenses and investments. These benefits also apply to the equipment assets you already own. If an instance arises where you require funds for an unforeseen business expense, leveraging your assets can be the answer to your immediate cash needs. Equipment lenders are able to offer lease buy-back programs in order to secure a loan against the equipment your company currently owns and will continue to use. Many lenders offer flexible terms and competitive rates for this type of lending product, making it a great option for creatively financing the needs of your company.
I’m no accountant, and would always recommend consulting a certified accountant regarding the decisions you make with your business finances. However generally speaking, financing your heavy equipment can provide some tax benefits to your business for the long term. Similar to leasing a vehicle from the dealership and writing off the interest along with the monthly car payment as a business expense, you should be able to do the same with your heavy equipment assets. The difference is, we all know vehicles depreciate in value very quickly. Heavy equipment though, is treated differently than vehicles in the eyes of lenders and banks. These large pieces of machinery are absolutely necessary and a crucial tool for generating revenue, and also tend to last a lot longer than your typical grocery getter car. The value of the asset partially depends on its ability to produce an income. Depending on your industry of choice, the equipment needs for your business can also be very costly. New heavy trucks are typically over $100,000 in value, yet many other types of heavy equipment for construction or farming can cost over $1 million. Rather than having to pay a lump sum of cash out of pocket for these assets, you can leverage financing to fund your equipment needs. Terms can sometimes be as long as 7 years to pay back your lender, however you will have immediate use of the equipment to generate cashflow for your business. Depending on your lender, this method of financing can also sometimes be non-reporting while still being fully tax deductible.
What Types of Heavy Equipment Could Be Financed?
Many industries use heavy equipment to conduct day to day operations and generate business. Some of them may be common to you, and some we tend to ignore as we go about our daily lives without realizing how they actually impact our societal norms. Below is a list of heavy equipment that could qualify for financing.
- Construction Equipment
- Heavy Duty Trucks & Trailers
- Farming & Agriculture Equipment
- Oil & Gas or Energy Industry Equipment
- Fixed or Mobile Cranes
- Mining Equipment
- Forestry Equipment
- Paving Equipment
- Heavy Boring and Drilling Equipment
What Other Types Of Equipment Can Be Financed?
There are some types of equipment that qualify as income producing assets for a business, but are not considered heavy duty. The equipment listed below can also be leveraged for a loan when a business serves a different industry outside of the heavy duty arena.
- Medical Equipment
- Furniture & Office Supplies
- Dental Equipment
- Restaurant Equipment
- Manufacturing Equipment
- Technology and Software
- Solar Equipment and Other Alternative Energy Equipment
- Equipment for Mechanical Repair Shops and Dealerships
- Cannabis Industry Equipment
These are just a few examples, but the list can go on and on for various industries.