Construction Equipment Financing 2017: Tax Implications and Advantages

//Construction Equipment Financing 2017: Tax Implications and Advantages

Construction Equipment Financing 2017: Tax Implications and Advantages

  • Line of construction equipment

Halfway through a time-sensitive job, you find yourself in desperate need of a backhoe. Trouble is, you don’t have the funds to meet the $175,000 price tag for the “yellow iron.” Traditional banks have made it clear that your scant three years in business won’t qualify you for construction equipment financing.

Do you give up the jobs to a colleague or find a way to sign those contracts?

$175,000 is an enormous sum out the door, but the Section 179 Tax Deduction (created particularly for small business) along with alternative financing, makes critical equipment possible. Capture those profits and stay in business with smart planning.


First, when you don’t have the cash and you don’t meet traditional banks’ criteria (typically cookie cutter and irrelevant anyway), you need alternative construction equipment financing. While initially available at higher rates, alternative financing’s common, multi-step funding process can steadily lower rates as business improves. You pay a set rate monthly for loan terms up to five years.

That monthly payment could make you hesitate, if not for the Section 179 tax deduction which has been pushed in small business’s favor for 2017. If the backhoe costs $175,000, your tax preparer deducts that a large chunk of it on schedule 4562. Consult your tax professional to determine how much you can write off against your income against this year. This move preserves your working capital, allows you to meet payroll and pay vendors.

Contractors who buy used equipment are entitled to the full benefits of Section 179, but those who buy new equipment get that and an extra perk: Bonus Depreciation or 50% additional depreciation taken after the after the Section 179 Spending Cap is reached. The bonus depreciation is calculated yearly: 50% off through the end of 2017, and 30% off up till the end of 2019. Because bonus depreciation ceases in 2020, starting the commercial equipment financing process now gets contractors the best benefits. 

Does Your Business Meet These Easy Section 179 Caveats?   

Spearheaded by legislators determined to support small business, Section 179’s few limitations on commercial equipment financing don’t apply to too many. Contractors only need to understand:

  • The deduction is limited to $500,000
  • Contractors can buy up to $2,000,000 of equipment (possibly several pieces)
  • Equipment bought in 2017 must be used before December 31, 2017
  • The IRS publishes a long list of equipment that qualifies. It includes “off the shelf” construction equipment, business vehicles and even software.

More Reasons Financing Construction Equipment Beats paying Cash

Buying construction equipment for cash excludes contractors from the discounts leasing provides. The interest you’ll pay on the loan not only allows you to take on jobs in front of you, it amounts to far less than the amount provided through a tax deduction. The advantages of construction equipment financing beyond Section 179 savings include:

  1. Flexible financial solutions — Equipment leasing companies will customize your financing to your individual need for cash flow, tax, and accounting requirements.
  1. Capital preservation — You don’t want to be uncertain when investing in such a large capital asset, be it backhoe or front loader. And yet, uncertainty could be the state of your business right now. Keeping capital available and on the ready when business is tenuous makes sense.
  1. Improved expense planning — Consistency in your cash flow and watching your bottom line is everything. Instead of going for that big all-at-once purchase, financing allows for even expenditures you work into your budget.
  1. Business cycle flexibility — Some leases take seasonal fluctuations into account . Alternative loans enable start-up and pre-profit businesses to obtain financing and have the equipment assist them to generate revenue and expected profit.
  1. Equipment expertise — Finance companies who deal in construction equipment have close ties with distributors and manufacturers. This helps you, because you have access to select types of equipment within the industry, manufactured for your special needs. The ethical alternative lender will also provide guidance on the piece of equipment to buy, as well as how to keep your business on track.
  1. Managed obsolescence — Updating your construction equipment is crucial for a few reasons, not the least of which is safety — safety for the operator of the machinery and those in its proximity. Leasing gives you the option to upgrade your equipment when new safety features come out.
  1. Dependable asset management — Good equipment financiers have tracking programs in place to see that your equipment investment gets the proper amount of use within its life cycle. This includes ongoing maintenance.

site manager considering construction equipment financing

LendSpark: A Risk-Adjusted Lender for Construction Equipment Financing

If your construction company is a well-seasoned business, is still in start-up phase or suffers from poor credit, LendSpark can get you on the path to obtaining the necessary equipment. Our whitepaper, How to Turn Around a Small Business Using an Alternative Lender covers our approach. Our success stories depict just what we’ve done for companies in your position.

LendSpark has helped arrange small business loans, equipment financing, working capital loans, asset-based lines of credit, real estate financing and more. We conduct a no-obligation discovery process to define all available funding options. To start the process, call us at 760-660-4355 or leave us a quick email here. We can create a road-map for reaching your goals!

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By | 2018-04-14T18:25:57+00:00 March 31st, 2017|Uncategorized|Comments Off on Construction Equipment Financing 2017: Tax Implications and Advantages