If you’re involved in the construction industry, and need financing for the purchase of necessary equipment, there are several options available to you.

Before you choose one of these options though, you should be familiar with how construction equipment loans work, and what your costs will be when you apply for a construction equipment loan.

How equipment loans work

The amount of money you borrow on a construction equipment loan will be determined by the type of equipment you’re thinking of purchasing, and whether it’s new equipment or has been used previously. Similar to a car loan, an equipment loan uses the equipment itself as collateral, which avoids the necessity of having to put up any other form of collateral.

You will generally have a fixed interest rate and a set length of time to repay the loan, with your payments being the same every month. The duration of your payments will be determined by the life expectancy of the equipment and the amount of money you were loaned in the first place. For example, a loan used to purchase computer equipment would require a short repayment term, because computer equipment has a notoriously short life expectancy.

Costs for equipment loans

The big benefit provided by equipment financing in the construction industry is that you don’t have to pay the entire amount at once, which leaves your cash reserve intact to be used for other purposes. As an example, instead of paying $20,000 upfront for a piece of equipment, you might end up paying $300 per month, which includes the interest rate applied to the total amount borrowed. This is a fairly simple calculation, which is entirely contingent on the amount being borrowed, and the interest rate applied to it.

Qualifying for an equipment loan

Generally speaking, it’s fairly easy to qualify for an equipment loan, especially if you come prepared to the lender involved. The amount you can borrow will depend on your credit rating, your business history, and the value of the equipment itself. Most businessmen find that qualifying for an equipment loan is not difficult, because the equipment itself serves as collateral for a loan, which provides some form of surety to the lender.

Does your company need equipment financing? 

If you need financing for a critical piece of construction industry equipment, we may be able to provide the capital you need to acquire it. Contact us at Rotay Capital Finance, so we can discuss some alternatives for obtaining that needed financing.