methods.
Purchasing a piece of heavy equipment has some definite advantages, the most obvious being that, if you buy it, you own it. Although buying has a higher initial cost, it usually results in lower costs in the long run. You have greater flexibility in how the machinery can be used, compared to leasing or renting, and you have more customizing options. However, in addition to higher initial costs, you are entirely responsible for maintenance and repairs. You also have to factor depreciation as well as transportation and storage into overall cost. And you may have limited flexibility regarding the scope of projects you are able to take on when owning a single piece of specialized equipment.
Renting has a lower upfront investment, tax advantages, a smaller overall commitment and lower overhead costs. However, renting also has higher long-term costs, usage restrictions and limited control over the equipment. At times you can be at the mercy of the rental companies regarding availability of pieces of machinery and their maintenance and service schedules. And there are usually very few options for customization.
Many companies have found that leasing is an acceptable middle-ground solution between purchasing and renting. Unlike rentals, leases often last for extended periods of time, sometimes years. Leasing usually includes maintenance plans and may also offer you the option of purchasing the equipment at the end of the term. This flexibility allows companies to keep their options open without a large initial investment and may give them time to consider purchasing in the future.
One factor to consider when deciding whether to rent, lease or buy is projected frequency of use. If you only need a piece of equipment for a short-term project, or perhaps for a long-term project but not on a regular basis, renting may be the best option. Conversely, even if you will not use that piece of equipment frequently, you can rent it out yourself and make money off it while it would otherwise just be sitting.
Financing for SMBs Many small to mediumsized business owners would like to opt for purchasing equipment but are concerned with the viability— or even feasibility— of obtaining a loan for such equipment. In that regard, we got some insights in an interview with Ben Johnston, the chief operating officer with Kapitus, a well-respected business lending corporation, about what contractors need to know about securing financing for revenue-generating equipment.
Steve Sniff: Ben, we heard that many contractors are expressing some trepidation about trying to get a business loan for equipment after COVID. Do you have any thoughts on that?
18 January 10, 2025 www. contractorshotline. com