Saturday, December 5

Funding Your Construction Equipment Needs

Have you had trouble finding funding for your new construction project or even construction equipment?

Are you baffled as to how that could happen given the increasingly robust nature of the UK economy and what that means for construction?

If so, the following information and discussion might prove useful.

The background

Some conventional lenders aren’t exactly fond of requests for the funding of construction projects or construction equipment. Why?

Well, there are a number of typical characteristics in this business sector that can easily worry non-specialist lenders. Those worries might include:

  • front-loaded projects in budget cost terms. That essentially means a lot of capital is required up front to get started but until the job is finished, the borrower may have limited income to service their debt;
  • extended durations.  True, it doesn’t apply to all construction projects but many are of lengthy durations running into many months or even years. This relates to the first concern above.
  • some potential lenders will worry about the somewhat notorious reputation of construction jobs to run over plan in time terms. That extends the funding requirements window and sometimes the durations are unpredictable. Many lenders don’t like uncertainly about when they’re going to get their money back;
  • in some cases, even when finished, a construction job doesn’t always result in income flow for the borrower. Examples include delays in selling or using the finished ‘thing’ due to legislative changes, economic changes since the lending was originally approved, delays in inspection and final signoff etc.

For all these reasons, construction-related funding can be difficult to find unless you consider specialist construction equipment and project lenders.

Options

As touched on above, specialist providers of construction equipment funding might be able to assist.

At this stage in an article of this nature, traditionally one would say a few words about the ‘how’ but in construction it’s very difficult to be specific in advance of having a real example proposal on the table.  That’s because unlike many other industry sectors, in the construction industry, every project is fundamentally unique and that means it is a very different funding challenge to those that may have gone before.

This is why specialist funding experts are important. There is no ‘one size fits all’ approach to securing appropriate funding.

Construction equipment funding solutions

Specialists will have access to multiple sources of funding that have their origin in lenders who understand the construction industry and who will be willing, in many cases, to put together a crafted bespoke lending deal. That will be designed for the exact and unique circumstances of the particular project under discussion.

Of course, your project outline will need to be supported by sound logic and a business plan that meets professional criteria. Be prepared for it to be challenged and be sure that you and/or your accountant are confident of your figures at the outset.  

While it is fair to say that some potential lenders are uneasy about construction projects in general, that has to be balanced against the perhaps larger number who are put-off by poorly thought-through and articulated propositions from the potential borrowers.  

Some specialist finance providers may be able to offer you advice and guidance at the outset on what information you’ll need to provide in order to increase your chances of a successful outcome.

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