Want to buy heavy equipment for a new assignment or simply looking to upgrade your fleet, you should understand one thing quite clearly and this is buying construction machines require a lot of money. If at all you have cash in your business, you can’t make use of it entirely as you have to take care of other financial obligations related to your business. This means that whatever you earn from your business does not entirely go to acquire heavy equipment. The allocation of funds should be for the entire business and not only limited to buying construction machines. So the way out is to go out and shop for banks who lends money for heavy equipment and at a lower rate of interest. However, there are few other factors that are equally important to understand before you take the call of approaching the bank and applying for loan.
Approach a bank that understands your business:-
You need not go to the bank with whom you have constant business. They may not have much idea about how you run your business and may foresee hassles in granting you the loan. The other option is to approach those banks which specialize in facilitating loans to construction companies. They have a team who have been working with construction companies and understands their needs. If you approach such a bank, they will send their team to your site and will do the necessary study before communicating on the loan amount. It makes lot of sense to approach someone who knows what you are dealing with rather than someone who does not have the slightest of clue and therefore may end up making a big mess.
Give them precise information:-
Lenders need certain set of information about the borrower and it is the borrower’s responsibility to provide precise and accurate data to the bank. Any sort of intentional incorrect information can lead to direct cancellation of the loan. It has been observed that borrowers assume things that may or may not happen but on the basis of those assumptions they end up giving incorrect data which leads to the decline of the loan amount. There are questions asked if any banks ever declined to offer loan. Borrowers assume that by outing a Yes will go against them and therefore they mess it up there. Banks have sources to pull up information and match it up with the data you have given. If they see any incorrect information, they get the reason to suspect you and also to deny giving you loan.
Your credit rating speaks for you:-
If you have a good credit rating, there is less likeliness that the banks will not find you a convenient customer. Try never to default any loan payments and always maintain a good credit history. This will keep your score high and also your chance to get a quick loan from any bank that you approach. Also the tenure of your business plays an important role for the bank to qualify you for the loan.
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Ideally construction companies and contractors buy heavy equipment by borrowing money from banks and other financial institutions. They do not want to use their financial reserves as that is needed to take care of other miscellaneous expenses and moreover the money you need to buy heavy equipment is often more than what people have in their reserves. So they have to eventually turn up to banks for borrowing funds. Now if you already have taken a loan to buy heavy equipment, you should make sure that you pay all the monthly installments to the bank on time or else it can have a negative impact on your credit score. Any default will affect your credit rating and this is something which you will not want to happen with you. If your credit rating falls, it gives a direct indication to the lenders that you do not pay your installments on time and they might reject any further loan application put by you in future.
Loans’ getting rejected is definitely not a good sign for a business owner. He is always in need of money and if any of his loan application is rejected at a crucial juncture, he may find himself into deep trouble. Though there are some financial institutions that are ready to lend money to people having poor credit rating but they do it with heavy rate of interest. So your financial need will be fulfilled for the time being but you will end up paying lot more than you would have to any other banks in normal circumstances. This can also have a negative impact on your business as you will not be able to save money to build up any reserves. Whatever you earn, you might end up paying that to the bank and it is absolutely pointless to engage yourself in something like that.
One thing leads to other. If you do not pay your monthly dues for buying heavy equipment on time and messes up your credit rating, you will also not be able to find lenders to buy other construction materials. It takes time to improve your rating and unfortunately in an industry like construction, you can’t afford to lose time. Therefore maintaining the credit score by paying your monthly dues on time is one of the best ways to avoid lowering of your credit rating.
The only way you can manage to pay the monthly installments is through proper planning and not to spend on things that are of least importance to the business. When we talk about proper planning, it means that you got to do your budgeting well and also take into consideration any unforeseen instances that are likely to happen and can affect the payment of your monthly dues. Take help of experts or of experienced people in your company. Their advices may really work for you. Consider what they all have to say and do not be too aggressive while taking business decisions.
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Loans have become a part of life for almost every citizen of this country. The day you begin to earn, you also apply for credit cards and start buying things on credit. This is also one form of loan where you intend to pay the creditor on or before the due date. Catering to our needs, there are different segments of loans that financial institutions have come up with. You can go for home loan, personal loan, auto loan etc. People who need money to start their business can also apply for business loan and they shall get it at affordable interest rates. Though not all banks offer loans at affordable interest rates, one needs to check which bank they should go with for easy payments of installments. So for people who have just stepped in the construction business and require loan to buy heavy equipment can shop for banks who can offer money at reasonable interest rates.
Before you start shopping for banks to apply for loans, it is imperative that you check the need to buy heavy equipment for your business. You can fulfill your requirement by taking it on rent where you do not own the equipment but can use it for a year or so and then give it back to the owner. You only have to pay an amount that has been agreed upon by both the parties at the beginning or at the end of every month.
However, if you feel that renting heavy equipment is not the solution to the problem and buying one is the need of the hour then you should begin to hunt for a bank. We all want to borrow money at affordable interest rates but an application has to go through a lot of screening in order to qualify for that. It has been seen that not many people qualify for loans at lower interest rates.
Pay a fee to get loans at lower interest rates:-
At times you may not qualify to get loan at a lower interest rate. Either you credit rating is not up to the mark or there may be some reason or the other that fails you to qualify for a lower interest rate. Some banks may still qualify you provided you have to pay them a fee to get that done. However, not all banks follow this as their guideline to bring down the interest rates and it completely depends upon what the banks need to lower your interest rate. To buy heavy equipment you need to have lot of money. The ideal situation would be to use an amount that is part of your savings and the balance should be taken as loan. In this way, even if the interest rate is high you would be able to manage it well.
Improve your credit rating:-
Your credit rating plays an important role in qualifying for the bank loan. So you should ensure that you keep it clean by paying your dues in time. Likewise once you buy the machine ensure that you pay the monthly installments on time without defaulting for even a month. This will keep help you to keep a healthy credit rating.