Understanding the Long-term Value of Construction Equipment Financing

Construction is big business – literally. Costs for large and heavy construction equipment can run into the hundreds of thousands of dollars, and in some cases, even more.

Manufacturers as well as their customers often look at construction equipment financing as somewhat of a routine necessity, even a commodity in some cases. Yet a deeper understanding of the ways they can use financing reveals that equipment finance is a path to increased sales, growth and long-term customer relationships.

Here are six key ways in which manufacturers, dealers and end users can realize value from the strategic use of equipment financing.

1. To purchase equipment – as well as parts and materials. Financing construction equipment can, of course, be a good option for businesses that can’t, or do not find it financially prudent, to buy it outright. Manufacturers also must often move quickly to purchase necessary materials. And today, used construction equipment can be in as much demand as new equipment. Not all financing providers work with used equipment, but the ones that do can be invaluable.
2. To access the latest technology. Modern construction equipment incorporates automation, robotics and other advanced technology that is continually changing and improving. Manufacturers, dealers and end users all want up-to-date equipment, but realize it is not feasible to continually buy the latest models. Leasing programs can let them upgrade to newer (perhaps more energy-efficient) models more frequently. As a result, they avoid equipment obsolescence, and have the right equipment they need to perform more, and more types of, jobs.
3. To improve cash flow.
   Manufacturers of large construction equipment want to move units quickly once they are produced. Heavy-equipment financing programs help them obtain funding when the equipment ships, and allow customers to acquire the equipment with convenient construction equipment loans or leases. Spreading the cost of equipment over time means that cash is available for other business needs.
4. To minimize risk in a fluctuating economy. Leasing or renting financing structures can offer protection from market fluctuations. In a highly dynamic sector like construction, renting and leasing are flexible options that make it easier for businesses to handle the rise and fall of market forces. Rather than tying up cash with a large upfront outlay and financing charges, renting can recover 100% of the cost of equipment with revenue generated by the project at hand. No long-term financial commitment also eliminates the risk of expensive purchased equipment standing idle between projects, depreciating in value and becoming obsolete.
   
   Lease and rent finance options let equipment contractors bid with more confidence on projects, too. They know they can access the right equipment if they get the job – but without risk if they don’t.
5. To facilitate customer sales.
   Manufacturers can offer construction equipment financing programs on behalf of their customers, either end users or dealers. A financing provider will learn what each customer needs to make a purchase work, and will help those customers finance down payments or even provide 100% of the equipment financing. When it comes to working with dealers, offering finance options to help them acquire the equipment they need – on terms that work for them – cements stronger relationships, short- and long-term.
   
   Plus, when a manufacturer can help dealers with financing for their customers, it alleviates a major burden. Those dealers then do not have to source financing for their customers. The ability to offer flexible programs to a dealer means that dealer can stick to the business of selling equipment and moving inventory faster.
6. To build out a dealer/distribution network. If a construction equipment manufacturer is looking to build, expand or maintain a distribution network, financing can be an important component. A good financing partner will understand that a dealer network is the manufacturer’s most important resource. They will provide exceptional service, be available when needed, focus on the priorities manufacturers and dealers set, and develop tailored construction equipment financing options. A strong partner can provide floorplan financing, too, allowing inventory carry at the dealer level, versus at the manufacturer level.

Manufacturers, dealers and end users alike can realize the long-term value of construction equipment financing. Understanding that equipment financing is a strategic business tool to use in achieving greater growth will generate results month after month, year after year.