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Creative & Construction

Home > Gifts, Gadgets & Toys > Toys > Creative & Construction

Construction equipment financing has two primary options, loan or lease.

As the owner of a business that typically uses construction equipment, the business owner has to bear in mind both options, both of which have benefits and drawbacks.

Construction Equipment Purchased With a Business Loan

Heavy construction equipment does not become obsolete during the life of the equipment. Construction equipment is very durable.

With proper equipment maintenence, heavy duty construction equipment will last for years past what a lease would offer. Also once the business loan is paid off, the business owns the equipment. The business gains collateral as it builds accrued equity. This can be very valuable for future financing on the business credit. Equity built used in the collateral gained can be used to obtain working capital in the future. Keep in mind however, that unsecured business lines not requiring collateral are available for businesses needing the extra working capital. Furthermore, the equipment that is bought can be counted on taxes as depreciation.

The Benefits of a Leasing Construction Equipment

Tax benefits is the number one reason that business owners generally lease construction equipment. This is especially true in terms of what is called a "true lease", where you get a 100% deduction.

When the lease is structured as a true lease, the end-user can declare the entire lease payment as a business expense.

For your equipment to qualify for this status, it should be declared at fair market value when the lease is up. Also, it is a good idea to speak with a professional tax consultant for more details.

The fact that you can often get the equipment that you need without any down payment is one of the primary benefits to some. Businesses, like start-ups, that are not flush with cash love this aspect if they can find it. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.

Plan Early for Your Construction Business

Whatever course you select, you need to consider where you need to put the money, the long term effects, how much you will save in terms of tax breaks and more. Think long and hard about the long term goals of your construction company.

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