Acquiring construction equipment, even used machinery, can be a significant investment for construction company owners, especially for those with less than perfect credit or startups without an extensive credit history. While traditional financing options usually create hurdles for these applicants, there are alternative options to obtain financing for used construction equipment.
Key takeaways for how to finance used construction equipment:
- Assess your financial situation and credit score before exploring your used construction equipment financing options.
- Research alternative financing options such as equipment financing, lease-to-own agreements and equipment rental.
- Build strong relationships with equipment suppliers, vendors or dealerships to potentially receive customized financing solutions.
- Consider alternative lenders who are more flexible in their eligibility requirements.
- Work on improving your creditworthiness over time to increase your chances of securing favorable financing terms in the future.
1) Assess Your Financial Situation
Before applying for financing for used construction equipment, it is important to assess your current financial situation. Take a close look at your credit score, outstanding debts and cash flow. While less-than-perfect credit may limit your options, it does not render financing impossible. Big banks and traditional lenders may not be options, and it’s better to work with a lender who’s willing to work with you rather than waste time only to have your application denied.
2) Research Financing Options
Equipment financing is a popular choice for acquiring used construction equipment. Look for lenders that specialize in equipment financing for businesses with lower credit scores, like Global Financial & Leasing Services (GFLS). They are more likely to understand your situation and offer flexible terms. The equipment itself serves as collateral, making it easier to secure financing.
Another option is a lease-to-own agreement, where you lease the equipment for a specified period with an option to purchase it at the end of the term. This can be a viable option for startups or businesses with limited credit history.
If purchasing equipment is not financially wise at the moment, consider renting equipment on an as-needed basis. This can be a cost-effective alternative, allowing you to complete projects without a large upfront investment and save for a purchase or lease later.
3) Build Strong Relationships
Establishing strong relationships with lenders, equipment suppliers, vendors or dealerships can open doors to better financing options. Reach out and discuss your requirements, emphasizing your commitment and long-term business potential. Such relationships may lead to customized financing solutions or even the opportunity to purchase equipment on installment plans.
4) Consider Alternative Lenders
Traditional banks are hesitant to lend to construction company owners with less-than-perfect credit or startups without a long credit history. However, alternative lenders, like GFLS have more flexible criteria, even approving equipment financing for those with a 640 credit score.
5) Improve Your Creditworthiness
While immediate financing needs may be pressing, it’s important to work towards improving your creditworthiness in the long run. Pay your bills on time, reduce outstanding debts, and avoid taking on unnecessary credit. Over time, these steps can positively impact your credit score, making it even easier to secure financing in the future.
Remember, each business’s financial situation is unique, and what works for one may not work for another. It is essential to evaluate your financial situation carefully and consult with lending experts, like our team at GFLS. We have been providing equipment financing solutions since 2009.