The construction market is experiencing an oversupply of equipment as dealers who previously purchased large quantities now hold excess inventory, creating a prime opportunity for buyers to acquire new machinery for their businesses.
Additionally, the construction equipment market is grappling with a complex mix of economic pressure, supply chain challenges, regulatory changes, and shifting market demands. These factors create an environment of uncertainty, where stakeholders — ranging from equipment manufacturers to contractors — are having to navigate a rapidly evolving landscape.
As the industry progresses and innovates, new financing models have been developed to enable construction companies to harness cutting-edge technology. Here are some of the exciting opportunities that await construction companies.
Rental Attractiveness
The flexibility of short-term leases and equipment rental opportunities is helping construction companies adapt to an uncertain market and use new technology without a large payment or significant operating expense. Short-term leases provide construction companies with more flexibility. The increasing popularity of these financing models will help these professionals more accurately budget for a project, allowing them to buy the equipment they need without restricting their up-front cash flow. With an increase in demand for construction projects and an in-flux of equipment that is available, it will be less expensive and more flexible for construction companies to rent equipment.
Electrification of Equipment
Manufacturing companies have been under more pressure to create energy-efficient and sustainable equipment. As a result, construction companies may have access to tax credits for prioritizing the use of that equipment. From a financial perspective, lending models can be tailored to enable construction firms to capitalize on tax incentives. However, fully electrifying substantial construction machinery, particularly those weighing two tons or more, presents significant challenges. As manufacturers strive to meet these demands, the cost of earlier equipment versions may decrease, providing more affordable options.
Rising Popularity of “As-a-Service" Financing
As-a-service financing is another lending option that has become increasingly popular. This will allow construction companies to pay as they use certain equipment, which is especially helpful for companies that are impacted by seasonal factors or have busier seasons than others. In the Northeast, snow leases are quite common due to the harsh winter conditions. During these months, construction professionals are willing to invest more in snow equipment since it generates significant revenue for their businesses. Conversely, it would be challenging to finance such equipment during the off-season when it sees minimal use. Therefore, paying for it during the months of peak usage is a more appealing option for companies relying on snow equipment.
To that point, advanced technology has provided equipment companies with the ability to analyze data, helping them to determine how frequently equipment will be used during a specific season and how it should be financed. The price of equipment will be determined by how often that equipment will generate income for a construction business.
Applying for equipment loans through a company that specializes in construction equipment has more benefits than applying through a bank, which will not have the same industry expertise and data to tailor financing options. As technology and the industry continue to innovate and evolve, construction companies can begin to rethink their financing strategy as well as look forward to models that will provide them with greater opportunities going forward.
