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How Should Your Construction Company Invest in Equipment? Part 1

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As your construction firm grows, you’ll need to have an accounting process in place to ensure you are effectively managing projects, spending wisely, and creating cash flow for future projects. From determining the most secure billing methods for projects to expanding your payroll or marketing your business, tracking the dollars and cents and developing funding strategies that incorporate both your present needs and your future needs can be a difficult balancing act. This is why construction firms partner with a construction law firm. Our Brandon construction attorneys can help contractors manage both their daily affairs and also protect their business long-term. 

One such financial question that is always on a growing construction firm’s mind is should they buy, rent, or lease construction equipment? In this four-part article, a Brandon construction attorney will discuss what elements factor into each one of these financial management decisions and potential legal ramifications for each investment. 

The Key Ingredients to Investing in Equipment

Before we delve into the individual advantages and drawbacks of buying, renting, or leasing construction equipment, lets first map out how construction firms can align their needs with the best options available to their business. Here are a few things to consider before making any financial decisions related to investing in equipment:  

  • Usage: Before you invest in anything (especially expensive construction equipment), a firm needs to consider how often this investment will be put to use. If you’re not utilizing this equipment the majority of the time, then its a bad investment to own. Never invest in specialized equipment if you only have one profitable project in line.
  • Additional Costs: It’s important to not only look at the price tag on the piece of equipment you plan to purchase because additional costs can increase the cost of ownership down the line. Construction firms need to perform their due diligence before an investment and consider other important elements like the projected longevity of the equipment, transportation and storage costs, regular maintenance and repair costs, depreciation, and an exit strategy (i.e. reselling, donating, etc.). When you consider all of these elements, you will not only get a better understanding of your expectations of the investment, but you can also potentially receive a better return on your used equipment when you are ready to move on to a newer make or model. 

Investing in Equipment Is a Selective Process

Although there is no one-size-fits-all solution to investing in construction equipment, construction firms need to perform their due diligence and be selective when considering if they should buy, rent, or lease equipment. For example, most firms will have some reliable equipment they regularly utilize, so it’s worth purchasing. In other cases, it makes more sense to rent or lease specialized equipment when it’s necessary. 

In the second, third, and four parts of this article, a Brandon construction lawyer will discuss a few specific scenarios when a construction firm should consider each of these options. Remember, for any of your project’s legal or tax saving strategy needs, consult the construction attorneys at Cotney Construction Law.      

If you would like to speak with a Brandon construction attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.