The Right Equipment At The Right Time…
About to land a great contract but not quite sure you actually have the best equipment for the work at hand? Meanwhile, “the latest and greatest” piece of heavy equipment you sprung for is sitting unused. Ouch. These kinds of equipment dilemmas are a familiar challenge for construction business owners. Smart leasing arrangements can make all the difference. Read on for pointers.
Cost Control and Flexibility
Among the many advantages of leasing equipment are flexibility and cost control. These days, leasing also offers construction company owners another potential advantage: the chance to try out advanced technology and get a true feel for what is possible. As Mike Fitzsimmons of Summit Funding Group, further points out,
Equipment leasing can also make a real difference when it comes to cash flow in times of shift: “With supply chain issues causing uncertain equipment delivery times, leasing can save money. Lease payments don’t start until the equipment is in place and operational, so with a lease, the customer isn’t paying for equipment that is stranded in a distant port.” Other strategic advantages to leasing equipment, as summed up by Fitzimmons include:
With uncertain contracts – not knowing when or if a project is going to proceed to completion – equipment leasing and financing can help manage cash flows. By leasing or financing equipment, construction companies know exactly how much their equipment costs are each month and can budget accordingly. As a bonus, through leasing equipment, they’re not stuck owning specialized equipment that may never be used if a project gets shelved.
Equipment leasing can also be a big help in acquiring the technology and equipment needed to help deal with the construction labor shortage. Augmented, virtual, and mixed reality equipment can be leased, as can robots, heavy equipment with remote or autonomous capabilities, and autonomous vehicles. High-tech equipment can become obsolete quickly and may need to be replaced in a few years, so leasing often makes more sense than outright purchase.
Growth Path: Consider Financing
If you have been hesitant when it comes to decisions such as financing equipment, you may actually be stymying the growth of your business. With a solid partner and a clear understanding of the numbers, financing can play a key role in a construction company’s expansion. At Construction Business Owner, Jennifer Timm, account executive, in the construction and industrial division at GreatAmerica, reminds us that disciplined financing can dramatically improve cash flow:
Growth is important to all business owners, and managing cash flow correctly is key to any growth plan….As a business owner, you pay your employees as they produce results, so why should a piece of equipment be treated any differently? Anything that produces revenue for the business should be paid for as it produces, so financing is an important part of solid cash flow management. For a contractor, time is money and efficiency is key. Financing equipment purchases allows you to afford more equipment, equating to more equipment on the jobsite generating more revenue … .Financing improves your cash position and allows you to invest the additional cash back into your business to continue to grow. Financing is not always meant for the businesses that cannot afford the equipment. Financing is widely used for those business owners who understand the importance of financing and maintaining strong financials.
As you consider financing options for equipment, Timm advises “It is important to focus on the return on investment and match a monthly payment to the revenue the equipment generates.” Of course, construction business owners who have built solid routines for keeping cash flowing are always ahead of the curve when it comes to making both short and long term decisions. For example, at GB Financial Services, Gary Bartecki emphasizes that on a weekly basis management should be readily able to estimate cash receipts and payroll, as well as fixed and other payments. Done consistently, these calculations will help you “stay ahead of the game should you start running short of cash.” Improved focus on quickly converting short-term assets into cash also contributes to construction business success: “Accounts receivable, notes receivable, work-in-process (WIP) and any hard assets sales all convert to cash receipts….The WIP…has to be converted to an invoice as soon as possible….Every day you gain converting WIP to cash makes a big difference.”
Solid Foundation: Surety Bonds
In construction, surety bonds are more than mere paperwork; they’re a testament to your financial stability and commitment to completing projects. Colonial Surety Company helps construction companies of all sizes improve bidding capacity, and demonstrate reliability. Our Hometown Bond Program provides local builders with credit based underwriting bonds for up to $250k—no financial statements required.
Got something bigger in mind? No problem. We’ve got something special for you too.
Receive Free Business Credit Scores instantly, just for submitting an easy, speedy Pre-Qual for a surety line of credit in writing. Once qualified, welcome new projects in, as you leverage all the benefits of The Partnership Account® for Contractors, including:
- Written Bonding Limits: Receive your single and aggregate bonding limits in writing.
- Instant Bid Bond Issuance: Gain the ability to issue your own bid bonds within minutes, using our powers of attorney.
- Real-Time Visibility: Use your private dashboard to view your underwriting profile and insightful financial data in real-time.
Surety Bond programs for construction businesses of every size are right here:
Bonding Programs at Colonial Surety Company
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial Surety Company is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.
