Constraint-Free Construction: The Importance Of Financial Flexibility In The Building Industry

March 23, 2018
12:00 pm
Construction, Construction Equipment, Equipment, Leasing, Working Capital

Success in business is only possible if you plan ahead, and this is particularly true in the construction industry. Building companies have to deal with a wide variety of contingencies that can suddenly raise their costs or cut their revenues. This creates serious shortfalls, making it essential that you have flexible financing to cover them.

Working capital offers the financial flexibility you need to deal with these problems. By providing cash, they allow companies with few liquid assets to cover cost increases and revenue shortfalls. Thus by maintaining access to working capital, you can survive:

Rising Resource Costs

From wood to drywall to wiring to scaffolding, construction companies need countless resources. Relatively minor changes in commodity prices can send the cost of these resources through the roof. For example, a sudden increase in demand for metal can drive up the price of wiring, scaffolding, and pipes, among other resources. These developments may well raise operating costs above what you’ve budgeted for. Working capital loans let you cover the difference until either the costs fall back down or your revenues rise to match.

Sudden Revenue Shortfalls

No matter how reliable and honest your clients are, there’s always a chance that they’ll fail to pay for your services on time. Even clients who work with you in good faith may still have to deal with financial problems on their end, forcing them to stall payments. If they simply don’t have the money, there’s not much you can do other than wait for them to get it, but you still need to fund your company until they do. Working capital lets you pay for everything while you’re waiting, so that your company doesn’t miss out on future opportunities because of problems with past work.

Inclement Weather

While you likely plan your operations around weather forecasts, storms sometimes travel farther or prove more intense than predicted. This can delay your operations, and thus your payments, for days or even weeks at a time. In the meantime, you’ll have lots of fixed costs that you still need to cover. With access to copious working capital, you won’t have any trouble doing this.

Injuries & Safety Issues

When a worker gets injured, your costs can increase markedly. Not only must you pay for their workers’ compensation, but if the cause of the accident isn’t immediately apparent, you’ll have to stop construction, identify it, and shore it up. With working capital, you can cover all these costs, restore your business to full safety, and get back to work.

For more information on costly contingencies in the construction industry or to obtain the working capital to deal with them, contact Dimension Funding today.

Secondhand Superiority: The Benefits Of Relying On Used Construction Equipment

As the owner or manager of a construction company, high capital costs will be a serious obstacle to success throughout the life of your business. From trucks to cranes to rigs to scaffolding, construction equipment is highly expensive, and is only getting costlier as time goes by. This creates a challenge for small and new construction companies, which struggle to afford all the equipment necessary to do their work safely and effectively. Used construction equipment offers an array of advantages for cash-strapped companies, allowing you to:

Reduce Purchase Prices of Construction Equipment

The initial purchase price for used equipment is far lower than that for new equipment. Depending on what specifically you are buying, you may be able to get twice as much used gear as new for the same cost. Not only does this prevent you from tying up all your money in initial purchases, but it gives you more financial flexibility to make sure you have every piece of equipment you need ahead of time. You’re thus unlikely to ever begin a construction job unprepared.

Deflect Depreciation

As with most vehicles, new construction equipment loses a large portion of its value the moment you take it off the lot— even if you keep it in pristine condition! When you buy used equipment, that initial depreciation will already be out of the way long before you make the purchase. As long as you make sure what you’re buying hasn’t been seriously damaged, you’ll be able to get the same quality gear without having to deal with depreciation. You can then resell it for nearly what you paid for it if you ever have to raise money or realize you don’t need the equipment.

Avoid Production Losses

When you buy new equipment, it’s often necessary to wait for weeks or even months for the manufacturer to produce and ship it. Used equipment, on the other hand, is ready to go right away. This means you will not have to pause your operations for as long, saving you from the cost of lost productivity.

Lower Equipment Leasing Expenses

Even if you plan to lease your equipment rather than purchasing it, there is still a financial advantage to choosing used. Used equipment is less expensive to lease than new equipment. This decreases the chance that you’ll have trouble keeping up with all of your payments. It also frees up more of your credit for use on emergencies and other expenses.

For more information on purchasing or leasing used equipment and other tips for cash-strapped construction businesses, contact Dimension Funding today.

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Tag: Construction Equipment