Heavy equipment leasing allows you to secure the machinery, equipment, vehicles, and other tools your company needs, even if you can’t afford the steep upfront costs of ownership. Whether you’re making a long-term investment in your business or just need a short-term lease to finish a specific project, financing your equipment can ensure you get what you need, when you need it most.
With no down payment (or a very low down payment), lower monthly payments than purchasing, and flexible contract terms, you can secure equipment without tying up all of your business capital. Ready to get started? Here is your guide to everything you need to know to navigate heavy machinery financing in Chicago, IL.
The Strategic Benefits of Equipment Financing
Choosing to lease or finance heavy equipment is a strategic financial decision. You can protect your company from cash flow issues, take advantage of tax benefits, reduce your risk, and gain access to the newest and most modern equipment and technology. Here’s a closer look at the biggest benefits of leasing or financing heavy equipment:
- Preserve Your Cash Flow – Rather than making a large, upfront payment to purchase equipment, you will make smaller, controlled monthly payments over time. This retains your cash reserves for other vital investments or needs and allows you greater control over your monthly budget.
- Access Better, More Advanced Equipment – Leasing or financing equipment allows you to have your choice of the newest and most modern equipment available, without paying a large upfront cost or having to commit to using it forever.
- Leverage Tax Advantages – You may qualify for certain tax deductions, such as the Section 179 deduction, which allows for the full or partial write-off of the cost of the equipment during the year of purchase.
How Does Equipment Leasing Work? Understanding Your Options
Commercial equipment financing works by utilizing a short-term or long-term rental contract to establish a monthly fee to use equipment that is owned by the leasing company. At the end of the contract term, you can choose to buy the equipment, trade it in for a newer model, or return the equipment and exit the contract with no further obligation. It’s crucial to understand your options when evaluating heavy equipment or construction equipment financing:
- Equipment Loans: The Path to Ownership – Long-term equipment loans allow you to own the equipment outright. The value of the equipment is used as collateral to secure the loan. This option is ideal if you want to build equity and need to use the equipment for a long period of time.
- Business Equipment Leasing: Flexibility for the Future – Equipment leases can be short-term or long-term. You enter into a contract that allows you to use the equipment for a set period of time without owning it. There are a few types of equipment leases: Fair Market Value Leases, which allow you to renew, return, or purchase the equipment at FMV after the lease term ends; Operating Leases, which are short-term leases that are more like rental contracts; and Finance Leases, which are long-term leases that offer an option to buy at the end of the contract.
- Sales-Leasebacks: Unlock Capital from Existing Assets – A heavy equipment sale-leaseback allows a business to sell its owned equipment to a financing company, which then immediately leases it back to the company. This allows the company to free up immediate cash for working capital or other investments while retaining use of critical equipment.
Tips for Securing the Best Heavy Equipment Financing
Before entering into a contract with any financing company, it’s crucial to fully evaluate your equipment needs, understand all of your financing or leasing options, and shop around. Here are some tips for securing the best heavy equipment financing for your company:
- Assess Your Budget and Needs – Begin by clearly defining the specific equipment you need and researching its cost. Make sure your needs align with your budget and your short-term and long-term business goals.
- Check Your Credit and Gather Financial Documents – Check your credit score and research the credit requirements of different lenders or financing companies. Then gather all of your financial records together, including income statements, balance sheets, and tax returns.
- Compare Multiple Lending Partners – Don’t accept the first offer made. Instead, shop around and compare offers from multiple lenders so that you can find the most competitive rates and terms.
- Build a Strong Proposal – Make a strong case for your company by showcasing your business at its best. Present a solid business plan, outline your growth potential, and demonstrate how the equipment is vital to your success. Highlight your industry experience and past track record of success to build goodwill and confidence with lenders.
- Negotiate Terms and Consider All Options – Use the leverage you gain from getting multiple offers to negotiate with your preferred lender. Be ready to negotiate interest rates, repayment schedules, and fees.
Common Mistakes to Avoid in Heavy Equipment Financing
It’s also important to be proactive about avoiding mistakes and approaching negotiations and contracts with a discerning eye. A mistake can cause your company to lose money, damage its reputation, or lose out on crucial equipment. Here are some of the most common mistakes to avoid:
- Overspending – Taking on more debt than your business can repay will cause huge financial shortfalls in the future. Don’t agree to a contract or lease terms that negatively impact your working capital or put undue pressure on your finances.
- Rushing – You must understand the approval timeline and plan carefully so that you don’t end up rushing the application process. This could lead to you accepting the first offer without taking the time to do your due diligence.
- Not Understanding the Lease Terms – It’s crucial that you fully understand the lease terms, including its duration, penalties for late or missed payments, and ability to pay ahead or pay the lease off early. Make sure the terms align with your project timelines and business needs. Be aware of the fact that the equipment serves as collateral and can be repossessed if you miss payments. Do not enter into an unwritten or verbal agreement for equipment financing or leasing.
Call ELGA to Explore Heavy Equipment Financing Options
Equipment Leasing Group of America has made it our mission to offer innovative financing with relentless commitment. We want to help you drive your business forward with the right equipment for the job. We understand how crucial it is for companies to have access to the heavy equipment and machinery they need when they need it.
We offer competitive, flexible financing solutions for heavy equipment, from construction equipment to agricultural equipment to factory machinery. Whether you are replacing machines or vehicles that have broken down, are expanding your operations, or need to overcome challenges with securing the equipment you need, we’re ready to help.
Call us now or reach out to us online to explore your options for heavy equipment financing in Chicago, IL, and the surrounding areas.