Many contractors make the mistake of rushing out to purchase the next big innovation in heavy equipment as soon as they land a job that requires the use of it. They lay out a huge chunk of capital for the machinery, and when the job is done, they’ve still got the cost of owning that equipment with none of the income to justify it. Consider an arrangement to lease heavy equipment instead.
The Benefits of Leasing
The benefits of a well-structured lease are many and varied. For your company, the biggest perk might be scheduling. Leasing will allow you to schedule the equipment in such a way that when you’ve run out of work for the machinery, you’ll be nearing the end of your lease term anyway. Most financiers will also allow you to customize your payment schedule so that your payment flexes with the work you have in your backlog – allowing you to pay for the equipment in the heart of its use, and ease up on your cash flow when the work doesn’t justify the cost. Every business owner knows that cash flow is really the thing that can make or break a company; make sure yours isn’t negatively impacted by a purchase plan when a lease is available instead.
Help Maintain your Cash Flow
A second advantage to arranging to lease heavy equipment is the lack of impact to your capital funds. Buying the equipment means dipping into capital and restructuring your assets to justify the purchase. But a lease is usually paid via operating funds, which means that cost is properly passed on to the client in your billing, rather than resting solely on the construction firm. Staying out of your capital funds frees that capital up for use for more worthy endeavors, like growing your company or broadening your work scope. Having the freedom that comes with having capital funds will likely make leasing the better choice. You’ll also find that maintaining your cash flow is much easier with a scheduled payment that takes care of all of the costs of ownership, rather than having to pay repair bills and taxes separately and in addition to a monthly payment.
When you begin your next construction project, consider arranging to lease heavy equipment rather than buying in order to take advantage of these benefits and more. Your leasing agent and your lenders can give you exact cost estimates of both avenues and help you determine the appropriate course of action for you and your business.