Finance & Lending

 

07 18 2016

Small Business Loans for Specific Industries

07 18 2016

Gear Up For Construction Season With Working Capital Or Equipment Leasing

In many places throughout the country, there’s only two seasons: winter and construction. While it might currently be the busy time of the year for many construction firms, now is also a great time to start planning ahead for next year’s productive season.

Builder-owners and managers of construction firms can gear up for next year’s construction season by laying the foundation for success today. From outfitting your firm for the future to performing a cost analysis on equipment to obtaining a working capital loan to invest in the business, it’s never too early to plan for next year’s schedule. Creating an early budget forecast helps construction firms establish a metric for business milestones to determine successes and failures. A better grasp of long-term financial projections can help a firm remain on track for growth.

Outfit your construction enterprise for the future

One of the most pressing concerns facing the construction industry is the growing chorus of clients and customers demanding firms incorporate more sustainable and green building processes and structures. For many construction companies, altering their entire operation to accommodate these shifting trends can be difficult and often unfeasible within their current budgets.

As noted in “Shaping the Future of Construction” published by the World Economic Forum, despite the major role construction firms play in shaping the urban landscape and promoting eco-friendly designs, the Engineering & Construction sectors have been slow to incorporate sustainable measures into their operations.

However, unless builder-owners and managers are able to effectively respond to this evolving trend, they might find their construction firm losing bids to more sustainable and eco-friendly companies. If a firm were to allow its competitors to gain a leg up on the sustainable construction front, it can be nearly impossible to make up the difference. This makes it important to have the capabilities now to build the structures of tomorrow.

There are several ways a construction firm can outfit itself for successfully navigating the sustainable industry of tomorrow. Working capital loans provide an immediate injection of money that can be invested back into the construction company to update its processes and make the enterprise more sustainable and eco-friendly. Ideally, the move will resonate with potential clients and customers and lead to more contracts down the road. Similarly, switching from purchasing construction equipment to leasing also frees up overhead that can then be used to re-invest in the business.

Perform a cost analysis on equipment

Are you having trouble with your current menagerie of Bobcat, Caterpillar and Deere construction equipment? Are they not as efficient or productive as they once were? As technological tools age, they often lose their edge and, instead of providing a competitive edge to construction firms, they can be a dead weight holding back the enterprise.

Operating a successful construction firm involves using the best tools available, from the most durable hammer possible to a top-of-the-line excavator. If the equipment isn’t functioning at an optimal level, it’s only going to create problems that manifest as revenue loss and diminished profit margins. To make matters worse, many construction firms don’t have the capital funds to cover purchasing new equipment.

An affordable and convenient way to ensure the firm’s equipment continues to add operational value without breaking the bank is by utilizing equipment leasing. Many construction firms – from international enterprises to the local contractors – take advantage equipment leasing options.

Instead of having to fork over the entire cost of brand new machinery, equipment leasing allows construction firms to make easy monthly payments, which frees up capex and lets the firm better distribute its resources. Further, Section 179 of the IRS code lets small construction firms write off the amount of the lease payments up to $500,000. These are just some of the many benefits associated with leasing equipment instead of outright buying it at full cost.

Prepare for the winter season

Just because business dries up during the winter, it doesn’t mean that construction firms are off the hook for making adequate plans either. In fact, establishing a clear plan of action for maintaining operations through the winter months can be just as – if not more – important than preparing for construction season.

When there are no new contracts, no capital inflows and no prospective clients on the horizon business planning requires innovative and highly cost-effective measures. While some builder-owners or managers might think it wise to cut back on staff members or take other cost-cutting measures to ride out the winter, these moves can come back to haunt the construction firm and make it difficult to scale operations when the spring contracts come rolling in.

During the off-peak season when business slows down, construction firms can take advantage of alternative financing options, such as a working capital loan that can be used to bridge the gap between the feast and famine of the winter and construction seasons.

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