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The COVID-19 pandemic has caused an array of challenges across many industries, and two years in, the construction industry, especially, continues to need to navigate these issues. Currently, contractors and business owners alike are finding that retaining a quality workforce, supply chain constraints, inflationary pressure, wage and energy costs are hitting the hardest. For the industry to continue to be successful, executives must have the ability to navigate supply, labor and financial uncertainties throughout the rest of 2022 and beyond.

Despite some slowing down, the current economy and the construction industry are being viewed with guarded optimism. The U.S. Bureau of Labor Statistic projected that the construction market is still growing at a rate of 10% from 2018 to 2028. Industry executives continue to eagerly search for ways to ease financial burdens while acquiring the equipment they need when they need it.

It should come as no surprise that the construction industry landed in the top five of the most financed equipment types of 2021, according to the Equipment Leasing and Financing Association’s (ELFA) "2022 Survey of Equipment Finance Activity (SEFA)." As heavy machinery is a key component to the construction industry, and often heavy equipment comes with a much heavier cost, many equipment finance providers are offering more options to help companies secure the equipment needed to successfully run their businesses. While financial uncertainties loom, equipment financing can help ease costs and provide the financial support needed to keep businesses running.

For companies looking to ease costs while still obtaining high-end equipment through financing services in the construction industry, there are many positives to financing options over outright purchase costs for heavy equipment and machinery. Let’s explore a few factors:

  1. Maximize and preserve working capital: With inflation on the rise, equipment acquisition costs are increasing, and supply chain constraints delay availability and delivery timelines. One way to ease this financial burden is by utilizing equipment financing to maximize and preserve working capital on revolving lines of credit to help maximize borrowing ability.
  2. Convenience and speed: Equipment financing is more convenient, and often a faster process than traditional financing alternatives. Financing equipment offers companies the immediate access to capital to help keep their businesses up and running with fewer financial and time-based setbacks or delays
  3. No upfront financial burdens: Equipment finance providers typically do not require upfront cash outlays or down payments for equipment purchases like traditional lender. “100% of cost/invoice financing” is a typical industry offering.  This is useful in overcoming budget, cash, or working capital limitations. Companies can rest assured they have the means to acquire critical use, revenue producing equipment to successfully run their business.
  4. Increased bonding capacity: Matching the financing tenor/duration to the useful life of long-lived assets like “yellow iron” is an important step to optimizing a company’s debt structure, especially when financing is locked in at a competitive fixed rate. By doing so, the company can conserve its working capital lines for increased bonding capacity as well as day to day operating costs.
  5. True lease: Leasing of equipment is also a helpful alternative. Leasing can provide the opportunity maximize cash flow, optimize equipment life cycle management, and hedge against equipment obsolescence or surplus capacity.

As we continue to move away from the thick of the pandemic, construction demand will only continue to increase. The present-day challenges in acquiring “yellow iron” may continue to plague the industry, but that does not mean that the industry must slow or come to a halt. The utilization of equipment finance offerings both helps companies obtain the equipment they need, while creating a landscape where companies can continue to invest in their growth. 

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