What is Construction Equipment Finance?
Heavy equipment is a significant expense for businesses in the construction sector. That’s why many lenders offer business loan solutions that allow you to buy or lease equipment over a number of years, managing the cost and relieving pressure on your cash flow. Vehicles, plant and machinery, and scaffolding are all eligible for finance. Some equipment financing companies offer separate plans specifically designed for scaffolders, as well as for small businesses and subcontractors.
How Does Construction Equipment Finance Work?
Here’s a quick overview:
Term and Repayment:
Construction equipment financing plans spare your budget by allowing you to make affordable repayments over a longer period. Payments include both interest and VAT, and the amount is fixed for the entire term of the agreement. Some lenders will let you opt to pay off the balance early, but this often incurs a penalty.
Lender Requirements:
The financing company will carry out credit and security checks and will ask you to provide evidence of your company’s finances. This might include accounts and income statements over a few years, plus any major customer agreements, a cash flow forecast and a balance sheet.
How can I buy or lease construction equipment with financing?
Most lenders offer three ways to acquire your new equipment:
Hire Purchase:
With Hire Purchase, the lender purchases the construction equipment. You pay back the cost over time, with interest, in a series of monthly repayments. Once that’s done, you can take over ownership of the equipment. You’ll usually pay a nominal fee for this.
Operating Lease:
Payments on an Operating Lease are calculated based on the predicted residual value of the equipment – this usually makes them more affordable. At the end of the lease, the lender recoups the remaining cost by selling the equipment. You can terminate the arrangement, rent a replacement, or choose an upgrade.
Finance Lease:
With a Finance Lease, the lender also purchases the equipment, but this time your monthly payments allow you to keep and use the equipment for the term of the agreement. Once the term ends, you can continue the agreement, sell on the equipment for a percentage of the proceeds, or return it to the lender.
Already have cash tied up in high-value construction equipment? You may be able to refinance it by selling it to a financing company and then leasing it back.
What are the pros and cons of construction equipment finance?
As we’ve already established, construction equipment finance allows you to maintain and use high-value heavy equipment without laying out a substantial upfront payment. Leases have fixed, predictable payments, which benefits your budget. You can also upgrade your equipment more often if you lease rather than purchase it.
However, it’s worth bearing in mind that the equipment will not belong to you for the duration of the lease. You may be subject to stringent maintenance requirements, even if you stop using the assets. You also won’t build equity as you would if you owned the equipment.
Finance Your Construction Equipment
Looking to fund excavators, loaders, dumpers or site machinery?
Submit your enquiry using the form below or contact our team directly to explore structured construction equipment finance solutions.
At Wenham Specialist Finance, we help construction businesses spread the cost of essential equipment while protecting cash flow and supporting growth.