A medium-sized builder located in Southern California found themselves in the position of needing a new excavator after their previously-owned excavator wore out. The new excavator would cost $500,000, and they were unable to find a used one available for purchase. In periods of normal demand, they would have been able to rent a new piece of equipment until they were able to afford the purchase of a new one, but with the current housing market, the company could not find any equipment to rent.

In order to maintain the progress of their projects, they needed to purchase new equipment quickly. Because of all the other outlays for the project, they found themselves short on cash. They turned to an equipment loan to finance the purchase.

 

After researching different options, they settled on a 5-year equipment loan. Knowing that they would need the excavator on several upcoming projects, it made sense to purchase the equipment instead of leasing it. After submitting the necessary documentation, which consisted of prior tax returns and financial statements, they were able to obtain financing at 7% for the term of the loan.

Once the paperwork was submitted, they found a supplier and purchased the equipment within 10 days. Though their project was slightly delayed, the equipment loan enabled them to get back to work and within 6 weeks, they were back on their initial timeline. The reasonable loan payment left them with cash reserves which were used for unexpected increases in labor and supply costs.

 

The building project was completed without further hiccups and the builder was able to sell all the homes in the development and move onto the next project by the end of the year.

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