Benefits of Construction Equipment Financing

benefits of construction equipment financing

Estimated reading time: 4 minutes

Businesses in the construction industry are always looking for ways to save money without compromising their quality of work. They want skilled construction workers, top-quality building materials, and the best equipment for the job at hand. As you know, equipment is vital in every construction project and is very expensive. One popular purchase option among construction companies and contractors nationwide is equipment financing. Read this Balboa Capital blog post if you are not fully aware of how equipment financing works. It explains some of the key benefits of construction equipment financing.

Helps get you out of a bind.

Perhaps you have a construction project coming up in the next few months, or you need to upgrade a specific piece of equipment. Financing is a great way to get the necessary equipment without breaking the bank. The initial investment to get started is easy on your budget, as are the monthly payments. This allows you to allocate your cash flow to other essential channels, such as payroll, materials, and insurance.

Because the equipment financing process is quick and hassle-free, you can acquire bulldozers, tractors, excavators, and more in a relatively short amount of time. That means your construction jobs can stay on schedule and not experience any interruptions. This makes your clients happy and helps you make more money.

Builds working capital.

It takes money to make money. That said, using up all of your company’s cash or its credit line to acquire construction equipment is not a smart business move. You should always be prepared for an unexpected economic downturn or a decrease in construction jobs. If you buy equipment outright and your revenues come to a halt, you need capital to help you stay afloat.

Financing construction equipment is a great way to preserve and build your capital. A predictable monthly payment is all needed, allowing you to save for the future. In addition, boosting your capital reserve each month can reduce or even eliminate the stress and anxiety associated with financial problems.

Opens doors to new construction jobs.

The types of jobs that your construction company works on will depend on your company’s size, capabilities, and equipment. Whether your business does small commercial and residential renovations or large multi-unit projects, there are always opportunities to expand into new areas and markets. If a project is large and involves architects, accountants, and building managers, to name a few, it will most likely require additional construction equipment and technology.

If you are invited to bid on a job with a size and scope that you are not accustomed to, do not pass on the opportunity simply because you do not have the necessary equipment. You can finance everything you need and take on new construction jobs as they become available. If you are unwilling to keep up with changing trends and adapt to market demands, you might lose jobs to the competition and set your construction company up for failure.

Tax deductions with construction equipment financing.

Construction equipment financing can give you some excellent tax advantages when tax season comes around. The Section 179 tax deduction allows you to deduct the purchase price of qualifying equipment you purchase and put into use from now through the end of the year. Section 179 works with equipment financing and cash purchases.

If you are closely managing the cash flow of your construction business, you can leverage an equipment loan to minimize out-of-pocket expenses and take advantage of Section 179. However, there are limits to how much you can deduct each year with Section 179, and not all equipment is eligible, so make sure you call your accountant before moving forward with a purchase.

Section 179 limits and information on the Balboa Capital website are for illustrative purposes only; the Section 179 limits and information provided are subject to change by the IRS. Please visit the IRS website or consult a qualified tax professional for confirmation of the current Section 179 limits and information related to your situation.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.