Heavy equipment financing is also considered construction equipment financing allowing you to avail of a business loan or a lease for buying the construction equipment for businesses so that you need not purchase the equipment straight out. If you need a crane, you can select from the new and the used ones; however, in either case, the crane purchased with the financing serves as the collateral for the financing.
It is wise enough to opt for the heavier construction crane financing for dedicating the cash flows to greater valued channels even if you have money for paying to the construction crane you require. Continue reading to know more about qualifying this kind of financing, the costs associated, and the terms involved in heavy crane financing.
The fundamentals of crane financing
There is a common misconception about crane financing, as it is the same thing as crane financing. Cranes are used mainly to help perform heavy duties, and it is the reason behind the higher costs marked for it, and getting crane loans can help you in buying the crane outright without making any upfront payments.
You might have discovered yourself needing cranes and heavy equipment like forklifts and bulldozers in your construction business. Having the proper type of crane at the right time can aid you in finishing up the project timely, allowing you to cut back on staffing and reducing the costs involved. It helps in satisfying your customers and availing better contracts down the line.
However, the price tag on the heavier cranes is highly daunting for even the massive businesses out there, and while you are a small business, securing machinery is pretty hard. Construction crane financing is the best suited for your business that requires a new set of cranes and is unable to afford them or starts making payments in full.
Qualifying for the heavier equipment or crane loans
After you have checked out the different kinds of qualification standards for the lender for crane financing, we will now start zooming out and avail greater generalized ideas of what it involves to qualify for crane financing. Crane financing is available only to business owners who meet specific standards like every other business loan.
Luckily, the bar is not too high for qualifying for heavy crane loans, while there are three routes for qualifying for construction crane financing.
Let us check them out.
1. Credit Score
If you have a credit score that is more than 600 and you have been in this business for the past year, then you are probably qualifying for the crane financing option.
2. Cash Flow
If your credit is not up to the mark, however, your business revenues are high enough relative to the cost of the crane, then you may start qualifying for construction crane financing based on the cash flow.
3. Down Payment
Even if your credit history is bad and you only have mediocre business revenues, then you may start qualifying for the heavier crane financing offered through the down payment. For example, if you wish to purchase a crane worth $25,000 and bring along $5000 on the table, it helps you qualify for construction crane financing.
The best thing about construction business loans involves their flexibility. The lender generally offers you better financing unless you are open to bankruptcies or collections for child support. Simply keep in mind the interest rate and how it reflects on the strength of the borrower. For instance, if you have bad credit, you might start qualifying based on extenuating factors; however, it will likely involve higher interest rates since you are considered a risk for lending.
Heavy-duty Crane Financing for Bad Credit
Borrowers typically having bad credit have a great chance of getting the approvals for the heavy crane loans than any other kind of financing. Since the crane collateralizes heavy-duty crane loans, they are financed, making them less risky for lenders. In situations where you default on a loan, the lender has the power to seize and liquidate the crane to recoup the losses.
Bad credit, as such, is never a deal-breaker in the process of loan approval. When borrowers have bad credit and prove healthier revenue or can offer a down payment on the crane, they are most likely to receive the funding.
Although you might get the approval for bad credit, you are more likely to encounter higher interest rates than borrowers with great credit. If you can wait on the funding, you might consider building your credit score prior to the application to receive the ultimate favored terms.
Leasing vs. Financing Heavy-duty Cranes
One of the foremost things is deciding whether a person should avail of the lease or a loan for the heavier cranes. The lease is extremely identical to the cranes on rent. You generally pay a specific monthly amount for using the crane. You are either returning the crane to the vendor or the purchase of the crane at the end of the lease term.
The purchase cost of the crane depends on the kind of lease you have; however, unless you purchase the crane at the time, you fail to become the owner. The crane does not show up across the balance sheet, which makes you the owner of the crane. You become the crane owner at the end of the loan term, although you are making the monthly payments.
The leases are quite well-known, with the crane becoming outdated instantly whenever the business owner is sure about their requirement for upgrading the equipment at the end of the lease term. However, construction cranes last for about thousands of hours of work; therefore, the loan might become a highly cost-effective route. At the end of the lease term, you become the crane owner and need not have to worry about the upgrades.
The perception is pretty common that leasing is not more expensive than buying. However, the case is not always the same. Check the prices and perform the proper calculations earlier to find the best option.
Costs and Terms
While qualifying for crane loans, you will start wondering about their meaning in business practices. Luckily, the terms and the costs of the crane loans are quite favorable since the crane is noted to serve as collateral. The lender can seize and sell the crane to satisfy the debt if you are a loan defaulter. The lender tends to offer favorable terms while they have security.
The following are the general terms for the construction crane financing option:
- Financing Amounts
You can easily start funding about 100% of the price for the crane as you start hoping to buy one for your business with the crane financing option. One thing to note here is that you may get up to 100% financing, which is reserved for the ideal borrowers.
If you have low credit, lowered revenue, low cash reserves, or the older piece of the crane, you will likely have to bring a few down payments on the table. The specific percentage depends on the crane’s quality, where you may hope to purchase one at your credit score; however, ensure that the conditions are right while you can potentially start financing the entire cost of the machinery required for the business.
- Time for repayments
The term duration for the repayment on the crane financing depends on the entire nature of the crane that you hope to buy, while you will generally start repaying the crane financing over the projected life of the crane. The loan term specifically does not exceed the useful crane’s life.
- Rates of Interest
Since the construction cranes secure the loans while the lenders carry on the lesser risk, the lender will seize the crane outright if you cannot repay the loan.
As the risk for the lender is low, you might have easier accessibility to the cranes at low-interest rates for heavy crane financing. Specifically, crane financing has low-interest rates, as much as 8% and about 30%. A word of caution: you might check the rates being advertised as low as 5 o 6%; however, it is entirely a rare occurrence where you would, in reality, start securing the loan at these rates.
The interest rates are affected by your credit score, tenure of your business operations, business revenues, condition of the crane, and down payment. The stronger your business revenue and credit, the lower your interest rates. The cost is also impacted by the lowered cost of the crane, which tends to have a bit high-interest rate.
- Funding Speed
Crane financing need not bear a rigid underwriting process compared to unsecured loans. You will easily start availing of the funding using this business loan in about a few days. But, there is an additional party to the mix here where the vendor involved from whom you are purchasing the crane. You need to ensure that you are having the invoice or the quote from the vendor while they are moving quickly for availing the crane on their hands once you have the funds from lenders.
The Bottom Line
In our post today, we have tried summing up everything about crane loans into a single guide. Start by locating the right kind of construction crane, and while you start to shop around for the best lender and the ideal terms involved with crane financing. Your tedious work will ensure that you invest in the right crane that suits your business.