Ben Johnston: The market for obtaining equipment financing is tighter today than it was coming out of the pandemic as many banks have scaled back their exposure to the industry due to lack of liquidity and rising defaults. In addition, interest rates are higher today than in years past, making it a more challenging market to obtain equipment.
Sniff: So, it sounds like their concerns are justified. Is there a silver lining anywhere?
Johnston: Yes. Fortunately, businesses with strong credit profiles and a history of financing essential use equipment have quality options both with banks and non-bank lenders.
Sniff: That is good news.
Johnston: However, business owners should expect a higher cost of capital than in years past and therefore should calculate the cost of the equipment relative to expected revenue that the equipment will generate to determine if the equipment will generate a positive return on investment.
Sniff: Good to keep in mind. Does this only apply to new equipment purchases, or can used machinery also find a place in the equation?
Johnston: New equipment should be easier to finance. However, in some cases, used equipment is also available to be financed and can offer a superior return on investment.
Cost Reduction Tips
Regardless of how the equipment is obtained, leveraging a few cost-cutting strategies in your business model can pay off handsomely in the long term.
Minimize downtime: One way is to install GPS tracking devices on each piece of equipment to be able to keep track of active hours. Make adjustments to the work schedule if it is found that any machinery is being unused for extended periods of time.
Proactive maintenance: An even more important way to cut down on downtime is by keeping your equipment in good repair. Don’ t wait for a breakdown to get something fixed. Have a regular maintenance schedule in place and stick to it.
Keep it clean: Routine cleaning can prevent premature wear and tear, which can save money on repairs and replacements. A machine that has been kept clean will also retain its value over time.
Use an equipment management system: These systems give insights into the true cost of maintaining heavy equipment through continuous tracking, logging and monitoring. Though it adds to your initial investment and ongoing costs, an equipment management system could pay for itself in prevention alone. The cost of one emergency repair is roughly the annual cost of a management solution. If you can eliminate even one emergency repair a year, your management system will have paid for itself.
Remember, as a small-tomedium business, you are not alone in trying to cope with the rising costs of purchasing and maintaining heavy equipment for your company. All other things being equal, you are on a level playing field, but two things can be used to give you an advantage over the competition: education and application. Take advantage of all the resources out there to educate yourself about the options available to you and choose one that you can customize to fit your business. Then apply this advice and the many other sources of information available to you to keep your equipment— and your business— in top running condition.
www. contractorshotline. com January 10, 2025 19