Construction Equipment Financing
Ongoing cash flow is the primary source of repayment in equipment lending, and the usefulness or value of the pledged equipment as a secondary source of repayment varies with the broad category of the equipment. Marketability and realizable value tends to decline as the equipment becomes more specialized. Equipment is tangible personal property acquired to be used in a business, profession, or farm.
The equipment used on construction sites can cost thousands of dollars and typically constitutes a major expense for construction firms. Financing construction equipment is the most common way for companies to purchase these large-scale earth movers, concrete delivery systems, cranes and other necessary elements of the modern construction workplace. Construction equipment financing typically uses the item to be purchased as the collateral for the loan; for instance, purchasing a crane would be accomplished by allowing the bank to secure the loan using the crane itself as the collateral basis. Construction equipment finances can run concurrently; a bulldozer can be financed during the same period as a crane or a concrete mixer.
Construction equipment finance arrangements are typically considered amortization loans. The cost of the equipment and the interest charges are figured for the expected useful life of the item, usually between 10 and 20 years. The payments are then spread out over that term. It is unusual for construction equipment financing arrangements to last more than 10 years in normal circumstances. For most construction equipment finance agreements, the construction company would still be liable for the remaining amount due on the equipment even if it is lost, destroyed or put out of commission before the amortization period has elapsed. As a result, construction firms should take care to perform regular maintenance on these large investments to avoid making payments on equipment no longer usable by the company.
CNF Exchange offers an innovative way for construction companies to locate the right construction equipment finance arrangements for their needs. The advanced CNF Exchange platform provides borrowers and lenders with a way to connect and make mutually beneficial lending arrangements for construction equipment finance, line of credit loans and many other financial transactions that can resolve cash flow difficulties for construction firms and provide new revenue streams for lenders in the competitive financial marketplace. Learn more about Construction Equipment Loans.