Six tips for navigating the equipment financing process

If you are concerned about cash flow for your construction business, you may be waiting to order new heavy equipment until after current projects are completed. While it is smart to focus on conserving cash, the decision to postpone asset purchases does not necessarily help you position your company to win more work.

Having a broader array of heavy equipment can help you win bids for projects that require more specialized equipment, as well as large-scale projects necessitating multiple pieces of equipment. A larger portfolio also helps increase equipment availability, ensuring that you can complete projects with less downtime, and deliver high-quality work on schedule.

Essentially, purchasing more equipment helps your company avoid obsolescence and maintain a competitive edge over rival businesses. However, buying new equipment is an expensive undertaking. A viable option to move your company forward is to consider funding heavy-equipment acquisitions through specialized asset-backed financing, allowing you to purchase more and better equipment that may otherwise be out of reach.

Here are six tips to help you navigate the financing process and decide if financing is right for your business:

1. Seek Heavy-Equipment Financing Instead of Tapping a Traditional Line of Credit
Every construction company needs to have a sufficient amount of working capital available to cover unexpected obstacles. Weather delays, change orders, late payments from customers and other challenges can impact cash flow significantly.

If you start to use some of that capital line to do equipment purchases as well, you will constrain your ability to have that working capital available for conducting day-to-day business. “Contractors don’t go out of business because they have lack of work or poor performance on their projects. They go out of business because they have no cash,” said Carl Oliveri, partner and construction practice leader at accounting and consulting firm Grassi & Co, in a recent Construction Dive story.

Therefore, instead of tapping your traditional line of credit, utilize asset-backed financing for your heavy equipment purchases. This strategy will help you conserve your working capital and support your growth intentions.