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Heavy Equipment Directory: Operator, Mechanic, New and Used Equipment  - Article Details

Construction Equipment Financing Requires Future Planning

Date Added: June 15, 2008 06:20:31 PM
Category: Financing

Construction Equipment Financing Requires Future Planning
By Chris Chandler

The business owner has to consider two options when it comes to buying construction equipment. First of all there are primarily two paths to getting the construction equipment needed. Buying the equipment outright or leasing it. Both have advantages and drawbacks.

Business Loans Can Help Buy Needed Construction Equipment

Bulldozers, backhoes, and other digging equipment are some of the equipment necessary for starting a construction business is very expensive. Buying the equipment outright can be very cost prohibitive for the business start-up, but a business loan can level the playing field. If the construction equipment is maintained properly, it will last years past what a lease payment offers.

Business owners also like the fact that once the business loan is paid off they own the equipment outright. This helps the business build accrued equity. The equity can be used later in time to help secure working capital if the need arises. This will most likely not be necessary since a good unsecured lines of credit can provide all the extra working capital they need in most cases. In terms of taxes, equipment that is owned can be counted on taxes as depreciation.

The Benefits of a Leasing Construction Equipment

Tax benefits of leasing equipment is one of the top benefits to the business owner. The IRS has made leasing 100% deductible and many business owners love this aspect of leasing equipment. The type of lease that gives this benefit is what is called a "true lease." If you do not know what we mean by a true lease, the Internal Revenue Service uses the term true lease to define how a lease is structured.

To qualify for "true lease" status, the construction equipment must be declared at fault fair market value when the leases end. This all this sounds complicated, but it really isn't. If you have questions it is good to consult with a professional tax consultant to help you figure out your best options.

The leasing company will often give an option to buy the equipment following the terms of the lease. Another benefit to leasing, is that business owners an often enter a lease agreement without a down payment. This is great for start-up businesses that do not have a lot of cash on hand.

A Final Thought on Leasing Equipment verses Buying

When considering leasing verses buying equipment, it is important to consider the future and the long term effects to your business. Look at both sides of the coin, and determine the best route for your business.

Need Construction Equipment Financing? Visit the business financing outlet.

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