Construction Equipment Research Paper

There's no doubt about it, construction equipment is expensive and it can be difficult to come up with the capital that you need to make such a large purchase. Most times, taking the money directly out of the company's accounts is simply not an option, that money needs to be available for other operating expenses. So, what's a company to do when it needs to buy a new backhoe, steer skid or excavator? For most, financing is the only option. There are three ways that this is generally accomplished; leasing, or obtaining an equipment or business loan.

Leasing Equipment

Entering into a lease agreement for construction equipment is, by far, the easiest, lowest cost financing option. In most cases, there is no down-payment required, and lease payments are generally lower than those for other financing options. This is an attractive option for small and medium-sized businesses with limited credit and even more limited capital reserves. Companies that lease their equipment are often able to buy it at the end of the lease for a lower price than if they'd bought new. However, there are down sides to leasing. Namely, leases often come with a higher interest rate, and lack the depreciation write-off advantages of purchasing.

Equipment Loan …show more content…
Unlike leasing, equipment loans generally require a down-payment from the borrowing company. That is, unless the lender takes into consideration the company's assets and experience with heavy equipment. In some cases, the down-payment may be waived completely and the asset holdings of the company are held as collateral. Another benefit is that the credit standards are often less strict than other loan types, making it easier for companies to obtain. That said, it's not always a fast process, it can take weeks to gain approval and subsequently take possession of the