Construction equipment financing has two primary options, loan or lease. As the owner of a business that typically uses construction equipment, the business owner has to bear in mind both options, both of which have benefits and drawbacks.
Construction Equipment Purchased Using a Business Loan to Buy
Construction equipment does it become obsolete like a lot of other types of collateral investments that a business will take on. For years, bulldozers, backhoes, and other construction equipment have endured. You don't see a lot of changes in this type of equipment because it is a time-tested technology. When maintained properly, it will last for years for the construction company owner.
Also once the business loan is paid off, the business owns the equipment. This is very valuable in the fact that your business gains collateral which builds accrued equity. This equity can be used later on down the road to help secure working capital if the need arises. However, we have found that unsecured lines of credit offered the small business person all the extra working capital they need, with requiring collateral. Furthermore, the equipment that is bought can be counted on taxes as depreciation.
Leasing Construction Equipment Has Its Benefits
The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is particularly true in a "true lease" where there is 100% deduction on taxes. If you do not know what we mean by a true lease, the Internal Revenue Service uses the term "true lease" to define how it is structured.
The thing about a true release is that the business owner can claim the entire lease payment off on business taxes, For your equipment to qualify for this status, it should be declared at fair market value when the lease is up. Also, it is a good idea to speak with a professional tax consultant for more details.
Most business owners like the idea of using a lease because you can get the equipment without a down payment or very little at all. So this eliminates the upfront costs involved in buying your own equipment outright. Business startups especially like using a lease agreement. It just makes sense. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.
Plan Early for Your Construction Business
Whatever option you go for, you need to consider where you need to put the money, the long term effects, how much you will save in terms of tax breaks and more. Plan ahead, and you will do fine with your construction business! - 15790
Construction Equipment Purchased Using a Business Loan to Buy
Construction equipment does it become obsolete like a lot of other types of collateral investments that a business will take on. For years, bulldozers, backhoes, and other construction equipment have endured. You don't see a lot of changes in this type of equipment because it is a time-tested technology. When maintained properly, it will last for years for the construction company owner.
Also once the business loan is paid off, the business owns the equipment. This is very valuable in the fact that your business gains collateral which builds accrued equity. This equity can be used later on down the road to help secure working capital if the need arises. However, we have found that unsecured lines of credit offered the small business person all the extra working capital they need, with requiring collateral. Furthermore, the equipment that is bought can be counted on taxes as depreciation.
Leasing Construction Equipment Has Its Benefits
The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is particularly true in a "true lease" where there is 100% deduction on taxes. If you do not know what we mean by a true lease, the Internal Revenue Service uses the term "true lease" to define how it is structured.
The thing about a true release is that the business owner can claim the entire lease payment off on business taxes, For your equipment to qualify for this status, it should be declared at fair market value when the lease is up. Also, it is a good idea to speak with a professional tax consultant for more details.
Most business owners like the idea of using a lease because you can get the equipment without a down payment or very little at all. So this eliminates the upfront costs involved in buying your own equipment outright. Business startups especially like using a lease agreement. It just makes sense. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.
Plan Early for Your Construction Business
Whatever option you go for, you need to consider where you need to put the money, the long term effects, how much you will save in terms of tax breaks and more. Plan ahead, and you will do fine with your construction business! - 15790
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