Bulldozer Financing

Ok, youre ready to go out on your own. Youre tired of working for the man. You have been grading and clearing land for years and know what it takes. You have great contacts that have plenty of work for you but you dont own your own dozer. And you certainly dont have $100K or $60K or even $30K to buy something decent that will keep working for you.

So what are your options? Borrow money from a friend? We all wish we had friends with this kind of money ready to hand out. How about a loan from the bank. Well, it might be worth a try. But banks are not usually interested in lending to new businesses and would likely require excellent credit and a huge down payment. Even if you were able to convince them to take a closer look they would probably require a rock solid business plan and financial covenants to oversee your progress.

There is another option. Equipment Leasing. Getting a lease for the bulldozer you need may be easier that you think. If you have decent credit you could be making money with that bulldozer next week.

What is Equipment Leasing?

Equipment leasing is essentially a long-term rental agreement with a buyout clause. The equipment is owned by the leasing company during the lease while the business has possession of and continual use of the equipment. Since the lender owns the equipment, the equipment itself is usually the only collateral. The buyout clause determines the businesss options at the end of the lease. Typically, buyout options are based upon a percentage of the original sale price (e.g. 10% or 20% buyout) or a fair market value (FMV).

Why would you want an equipment lease instead of a loan?

1. Easier to qualify. Banks usually require financial history of at least 2 or 3 years. Some leasing companies will finance equipment for start-ups with a simple credit application.
2. Improve your cash flow. A new or growing business needs to control cash expenditures. Equipment leases rarely require a down payment. -- if anything, only a few payments in advance. Loans require a significant down payment of up to 25% or more.
3. Tax advantages. Leases are frequently 100% tax deductible. If you are shopping the cost of a loan vs a lease, this is a very important factor that can make the lease a significantly better financial solution.
4. More for your money. Since the initial cash outlay is lower you can get more or higher quality equipment.
5. Other advantages. There are some other advantages depending upon specific situations including balance sheet impacts, seasonal payment options, protection from equipment obsolescence, to name a few.

Many large institutions and small companies provide leases. Some of these lenders are focused on credit (good or bad), a specific type of equipment (e.g. bulldozer financing or medical equipment), large or small ticket equipment, or leaseback financing.

Many lenders specialize to be more competitive. If they are working with clients who have less than perfect credit they need to effectively manage any defaults. If a typical bank were to give out a loan on a bulldozer and the business defaults, the bank would likely loose a lot of value when trying to sell it. To offset this risk, banks usually require a significant down payment. A specialized leasing company can minimize this default loss and can therefore provide better terms.

How do you find an appropriate lender?

A good small business loan broker will have access to many funding sources and will be best able to find the right lender for a client. These brokers are similar in function to a mortgage broker where they select the lender and process the paperwork to facilitate the entire lending process.

Back to your Bulldozer.

So, looking for some bulldozer financing? You may want to talk to a business loan broker regarding the advantages of leasing your bulldozer. A lease may help you get started sooner, get a better dozer, and save more of your cash. And it might just save you a lot of money in the long run.

Tim Lawless is President of Unionwide Financial Services. Unionwide provides small businesses nationwide with financing options including: equipment leasing, SBA loans, and accounts receivable financing. One area of specialty for Unionwide is Bulldozer Financing.