Start Up Construction Equipment Financing

There are many alternatives in obtaining start up construction financing. The first logical place to investigate your start up financing is at your local bank. This may be a pleasurable experience if you have many contacts at your local bank but most people usually don't have these types of connections. The start up business must have at least high 600s on their credit scores and be prepared to go through a lengthly paper process. Prior year tax returns may be required, current personal financial statments needed and various other lending requests. The business start up is considered a high risk factor to the bank and must adhere to higher lending standards.

Most banks and financial institutions offer loan and/or lease programs. The difference is that the loan program transfers title at the end of the payment obligation, whereas the leasing component offers a rent type environment during the course of the lease with a buy out option at the end of the lease period to take title. Usually, the monies required upfront to acquire a loan are higher and eliminates many candidates. The Leasing arena requires anywhere from usually first and last payment to approximately 20% down on the cost of the acquistion depending on the type of industry requested.

On the start up loan and lease programs for a construction equipment applicant, the applicant must investigate whether the bank and/or financial institution considers this a qualified asset which they will lend on. Most lenders like this hard type of asset but others may specialize in other industries such as medical and transportation such as limos, limo buses, ambulances etc. Some Lenders will only lend up to ten years based upon the age of the truck where others may extend beyond this parameter. Loans and leases usually run anywhere between 36 -60 months based upon the age of the construction equipment.

The start up construction equipment applicant is seeking a relationship with the lender. The front money to commence the lending arrangement, the monthly payments and the buyout clauses at the end of the lending instrument, if there is one, is paramount in making a prudent business decision. The amount of paperwork and hoops to jump through to get to end of the financing process are considered in the total evaluation process.

As we discussed above, there can be a lengthly paperwork process to obtain your start up financing. Recently, some of the lenders have changed their computer qualification models and require application only programs This means there are no income tax returns required, time consuming personal fianancial statments needed, and other key documents either prepared and /or requested. This program is usually geared for the seasoned business but there are start up application programs available. These application lending programs run as high as $100,000 for this start up program. It is important for the construction applicant to check out all the lending programs available. The collateral is the acquistion and usually no additonal collateral is required. The minimum credit score required for all construction equipment applicants may run as low as 575.

The last thing you should be aware of is dealer/financing inventory programs. What this means, the lender has repos and/of a off lease inventories that they want to move for cash flow purposes. This financing arrangement is geared to the start up as well as seasoned business and may offer the construction applicant an execellent buying and financing opportunity. As this economy weakens, housing starts down and large projects to start delayed, the can put the lender in a up side down position and offer the start up a way to enter into the industry with an unique opportunity.

Another option available for start up businesses looking for construction equipment is lending programs that require additional collateral. The start up applicant may have very poor credit, such as 550 or below. He also could have a recent discharged bankruptcy and/or judgements and liens that may be still outstanding. Most typical lenders will reject the start up applicant based upon these factors described above. If the applicant has equity in a house, free and clear title on vehicles and construction equipment, certain lenders can put together a lending package to solve the road blocks to obtain the financing desired. Be aware that the rate factor and/or interest rate charged on these transactions which are typically very high.

When you are shopping for your construction equipment financing, consider the following, the front money, the monthly payments, what collateral is required, and what the buyout clauses mean. Also, make sure you have a good source of income coming from a contract and/or other methods. Addionally, be aware that you are going to personally guarantee the transaction.

Happy hunting for your construction equipment and its related financing.....

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