Owning and managing the finances of your construction company can be headache—especially since the overhead costs for materials and equipment that are needed can be enormous.Although you have no choice but to purchase the materials needed outright, you have a choice of either buying or renting construction equipment. Renting construction equipment can strengthen your company’s borrowing power; read on to learn how.
What Is Your Company’s Borrowing Power?
At times, you may not have sufficient capital initially to pay for all of the materials, labor and other expenses involved in a construction project. In these situations, you may need to take out a loan in your company’s name. Banks and other financial institutions that review your loan application will take your company’s borrowing power into consideration when determining whether the loan will be approved or rejected. Strengthening your company’s borrowing power will increase your loan allowance.
Your company’s borrowing power is based off of the amount of liabilities and assets it has. The company’s assets will include any equipment or land that your company owns and the amount of existing capital that is presently sitting in the bank or is being invested. Liabilities include any remaining debts.
How Does Renting Construction Equipment Strengthen Your Company’s Borrowing Power?
Construction equipment that are necessary for the project can be quite costly. Chances are, your company will need to many different types of construction equipment for the project. Buying these equipment outright can be expensive, which is why most companies will either lease or finance them. The remaining debt on the equipment is considered as a liability, and will decrease your company’s borrowing power.
On the other hand, if you choose to rent the construction equipment, the full cost of the equipment will not be your company’s responsibility. As a result, it is not considered as a liability. Instead, the full cost of your rental contract will be taken into consideration. For example, if you choose to rent a mid-range excavator, you can expect yourself to pay about $3,433 for a rental term of four weeks. If you only need the excavator for four weeks, the rental cost o $3,433 will be considered as the liability and not the full cost of the equipment. In addition to reducing the amount of liability your company has, renting construction equipment will also free up capital, so it can be used elsewhere in the business.
What Type of Features & Services Can You Enjoy from Construction Equipment Rental Services?
Renting construction equipment will not only increase your borrowing power in the sense that it reduces the amount of liability and increases the amount of capital your company has, but it will also reduce the overall cost of expenses involved with using the equipment. For example, you can expect these following issues to not occur since the rental company will be partially or fully responsible:
- Save money on storage
- Save you from headaches related to EPA compliance
- Choose from equipment with the latest technology and features, so you won’t have to pay for upgrades or new accessories
- Save on maintenance
- Be unaffected by depreciation costs involved with normal wear of the equipment
Renting construction equipment may be a good route for your company to take. There are plenty of construction equipment rental services available. Before you sign on the dotted lines of the rental contract, make sure you are fully aware of how owning and renting the equipment will affect the finances of your company, and make sure you carefully read the fine print and terms.
Learn more about your options by contacting companies like LAX Equipment Rental.