[dropcap]T[/dropcap]here are many financing options for professional landscapers, and it can become overwhelming when trying to select the best option for your business. When considering a new equipment purchase, there are three primary financing options to choose from:
- Installment Loans
- Revolving Loans
Three Choices On The Table
An operating lease allows you to make a fixed payment over a predetermined amount of time, typically two to three years. At the end of the term, you can either choose to purchase the equipment, or return it back to the dealer, much like an automotive lease. This option is ideal if you would like to improve cash flow throughout the year. This option also allows you to work with your dealer to create an equipment rotation plan, where you can rotate equipment every two to three years. This is an attractive plan because you can use newer equipment, reducing the risk of equipment downtime. As an added benefit, you can work with your dealer to match the lease term with the warranty period, ensuring the machine is under warranty throughout the length of the lease.
If you want to own the machine at the end of the financing period, a loan would be the ideal option. The loan payment can be spread out into multiple installments, that are customized to your cash flow throughout the year. Unlike a lease, an installment loan does not limit the number of hours, and equipment damage does not impact your loan terms. This is particularly appealing to landscapers who anticipate they will put many hours on the machine.
Revolving loans are typically used for smaller purchases, such as parts or handheld equipment. Essentially a credit account, a revolving loan allows you to purchase parts, attachments and smaller items conveniently, while making a monthly payment. This option is not ideal for larger purchases, but provides a solution for large landscape businesses with a regular need for parts.
Your dealer should be a good source of information when it comes to financing options. To prepare for a conversation with your dealer about equipment financing, ask yourself a few simple questions:
- How long do you need the machine?
- How many hours will you use the machine each season?
- Do you want to have new equipment every couple of years?
- Do you want to own the machine, or focus on operating it at the lowest overall cost?
- What are your current and anticipated needs beyond mowing equipment, like attachments, handheld equipment, parts, and maintenance?
After thinking about these questions, have an open conversation with your dealer to identify the best solution based on your business needs and plans. There are equipment dealers that can streamline the financing process for their commercial landscaping customers to help you get the equipment you need to make your business succeed.
Angie Harms is tactical marketing planner with John Deere Financial.
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