Used heavy equipment financing is something Crest Capital has done for more than 30 years and remains one of our core offerings. We finance heavy equipment for both equipment purchased from a dealer, and we also finance private party used heavy equipment sales. In some cases, we even financed a piece of equipment when a company bought it new, then six years later financed the used sale for the new owner.

One big reason used heavy equipment is a robust industry is that most pieces of heavy equipment are not as impacted by technology as much as other types of equipment. Of course I’m not saying advances have not been made – today’s heavy equipment offerings are definitely better than yesterday’s – but the advantages may not be immediately noticeable, especially when it comes to the core work. An older backhoe can generally hold its own against a newer model for most backhoe-related functions. An older dump truck can still do what a dump truck is supposed to do – hold and dump its cargo. The interior, engine, and creature comforts may differ radically, but the “hold and dump” parts will be similar. A profitable, growing construction company can certainly find use for a used dump truck.    

There’s almost nothing I like better than talking to someone about financing used heavy equipment. I like construction people in general, and there’s always some excitement in the air when a used backhoe, dump truck, skid steer, or similar is changing hands. And I enjoy it when businesses are happy about getting new-to-them equipment and seeing a profitable future.

If you’re in the construction industry, you can probably look back and feel an affinity for a certain piece of heavy equipment you no longer have. It may not be today’s shiny new model, but I’ll bet you’d like to operate it one more time!

I posted a bit back about “Clarity in an Unclear Year” where I mentioned if you are still surviving, things look good. But that does not mean you can sit on your hands either. 

I’m no medical expert, but it’s clear to me that we’re going to be in flux for a while, and the only way to ensure you come out the other side ok is to adapt to what is (instead of getting upset over what isn’t). 

So let me talk about something that I see right now as a key differentiator in companies: adapting your business to still provide service. Particularly good service.  

I’m seeing it a lot now: since Covid-19, service in a lot of industries has gone down. Some of this cannot be helped: if you are restricted from doing business normally, it’s hard to keep up the same level of service as you did prior, at least in the beginning.

But it puzzles me to see companies completely drop the ball and let their competition in the door.

A month ago, I called my locally owned pet store to see if I could do curbside pickup. They were closed (at 2pm on a Wednesday). Reason? Wednesday is a slow day for them anyway, so in Covid-19 with nothing but curbside pickup, they think there’s no sense being open on Wednesday. I got my dog food at a chain instead. Nice store, too – I’ll probably go back.   

Some companies could not shift all that fast to work-at-home, and have let their phone service really slack. This isn’t anything a good telecom provider can’t fix (and we finance telecom equipment), but companies are reluctant to make any investment right now. That’s their right of course, but I guarantee someone else IS making the investment, and is going to shine.

I also know a landscaper who is increasing his presence and offerings, and he’s doing well. Reason? More people are home and spending less on “going out”, so they are putting more money into their homes. His competition is moaning the loss of commercial contracts as stores and offices closed, and my friend is now clearing brush away and tilling earth so homeowners can plant a new garden (he calls it his “garden starter” service). 

We’re all in the same boat, but some paddle a lot better than others. What is your competition doing? 

Predictably, a lot of business activity has paused. With many businesses forced to shut down for a few weeks, it’s only normal that some companies put expansion or improvements on hold for a bit. At least until they see how things will shake out.* 

*Side note: I personally feel the recovery will be, to borrow a movie title, Fast and Furious.

And while no lender (or equipment seller – more on this in a bit) is unaffected by this, I have noticed a distinct new business borrower who has suddenly come out of the woodwork: the successful “we have money in the bank and an excellent credit score” company that doesn’t need equipment financing, but is doing it right now to preserve their cash reserves.

These new finance-seekers are companies that, in general, are still operating right now, historically have fast-timed receivables (they get paid quickly for their product/service), and have ample assets in the bank. And in the past, when they needed new or used equipment, financing is not the way they bought it – they simply paid cash. 

But right now, they would feel better using borrowed funds for needed equipment purchases, make monthly payments, and keep their cash in the bank. I’ve talked to a few of these new customers over the past two weeks, and most of them had the same thought, which was generally “we’ll keep our money, but still get the equipment now”. 

I like hearing this, because whenever I talk about the advantages of equipment financing, it’s almost word for word what these new customers said: “get the equipment now while keeping your cash reserves in the bank for other things”. So it’s nice to see companies doing exactly that (see, Fletch knows what he’s talking about.) 

One addendum to this: equipment sellers, be aware of this new type of buyer. Because while they may have paid cash in the past, they are now looking to finance. Are you offering a monthly payment option? If not, visit https://vendorprograms.crestcapital.com  – it’s easy and free. 

Oh wait – one more addendum: hopefully these “new to financing” companies will now see that financing equipment is a good business strategy ANYTIME, and not just when we’re under quarantine. Bottom line: buying equipment via monthly payments always plays out well (and wait until they use Section 179 – boy will they be happy!) 

I had a post ready about something equipment financing related, but it doesn’t seem appropriate today. I’ll post it sometime in the future, but for now, a few words on what’s going on, and what I feel will be the outcome.

First, I have to address the obvious – for some businesses, the COVID-19 crisis will change an awful lot. A restaurant that was already on the ropes may not survive a month or two of “takeout only”. And for some newer businesses that don’t have their feet under them yet, this is super challenging and could derail them. 

But whether you’re seeing a slowdown or not, remember this: there are millions of businesses that survived other large bumps in the road. 9-11. The Great Recession. Etc. And again, I realize the COVID-19 crisis is neither of those, but the fact remains that on the other side of this, companies will emerge, and many of them will be stronger than ever. 

Right now, some companies are using this time to re-tool. Smart, seasoned businesspeople know this will pass, and it will have to pass quickly as well. A month or two may seem like forever if your kids are home from school and you’re reading the news on an hour to hour basis, but again, smart, seasoned businesspeople know a month or two is an eyeblink.  

When we go back to normal (and I admit it will be a bit of a “new normal” for a while), how will you emerge? Will you be ready to hit the ground running? Your competition may have holed up and watched Netflix – what did you do? Did you repair, retool, rebrand, replace, reassess, etc.?  (boy that’s a lot of “R” words. Unintentional on my part!) 

It’s a certainty that we are all going through something unprecedented. But it’s also a certainty that it will end, and commerce will resume (probably in force from pent up cabin fever!) What is your plan for then? Do you have one? I hope you do, because if you’re slow or at home, THAT’S how you should be spending this time. Netflix will still be there tonight. 

But sometimes, I get frustrated with how Section 179 is often presented. I’m a plain-language guy, and once something starts to sound too much like an advanced-level economics course, most people (including myself) tend to tune out.

So when I see Section 179 called an “accelerated depreciation schedule” like I did the other day, it makes me roll my eyes. 

Ok, technically, that’s what it is, because under “non-Section 179” circumstances, you depreciate a piece of equipment yearly until the value reaches zero. Section 179 lets you depreciate (aka write off) the entire purchase price right now. 

But calling it an “accelerated depreciation schedule” sounds like the title of a school assignment that you put off until the last minute. Can’t we find a better way to think about it?

Here’s how I like to present Section 179: It’s a discount on your purchase. 

Because you write off the entire purchase price as a deduction, the discount equals whatever your tax rate is. We can conservatively say 24%. But it can be 32% or even 37% – again, whatever your tax rate is, that’s your discount.

If you buy a 100k piece of equipment, you write off 100k on your taxes. At (say) a 24% rate, that means you save a cool 24k on your taxes.  These are real dollars that you get to keep (that you would have otherwise paid), so it’s exactly like getting a 24% discount.

Imagine this. You need a new widget. The new widget will greatly help your business. So you go to the widget-maker and negotiate a great price on a new widget. Then the widget-maker says “buy it now, and you’ll get another 24% off”.

You’d jump at that, wouldn’t you?

That’s Section 179 right there. It expires for 2019 on 12/31, meaning you have roughly two more months of it this year, so take advantage.

Let’s talk about rates and equipment financing for a minute, and trying to get the best deal you can for yourself.

Rates on any type of lending are affected by the Federal Reserve Rate (aka, “the Fed”). If that goes up, banks and other lenders raise their rates. When the Fed goes down, lending rates lower. The actual mechanics are a little more involved than that, but this isn’t economics class, and while the algorithms and such can be complex, the universal “Fed Down, lending rates down / Fed Up, lending rates up” holds true (this also works in reverse on investment interest, but that’s for another industry!)

Well, here in the middle of my “what month is good to finance equipment?” series, I’m going to say right now is a very good time, because there are indications that rates are going to tick upward soon. Let me explain:

During the 2008 financial crisis, the Fed rate dropped to zero, to help spur borrowing and economic activity. And it’s essentially sat there for almost a decade. But late last year, something happened… the Fed raised their rate to 0.50%. Then in March it was raised to 0.75%. Yea, I knew I saw a few extra pennies in my savings account.

The Fed has made noises that there will be another rate increase later this year. It’s not guaranteed, but most people in the know think it’s likely. So what happens is, banks and other lenders will start to creep their rates higher in anticipation.

That means right now is a great time to finance equipment (lease it too). The rates are still low, and equipment financing is the best bargain around, especially if your equipment lender utilizes fixed rates. This means you can lock in a great rate right now, and then smile knowingly when rates go up, because you’re unaffected. I mean, really, why pay extra money by waiting, especially if you need the equipment now?

Listen, you know Fletch is good at this prediction thing. And I say rates will go up again this year. So in the words of the immortal Ron Popeil (you know – the pocket fisherman and hair in a can) “operators are standing by – call now!”

Ahhh, springtime. When a young man’s fancy turns to… equipment financing!

(quick – Mrs. Fletch isn’t around, right?)

But seriously, March is a great time to finance equipment. Let me give you a few reasons why:

First, winter is ending. For about half the country, this isn’t that big of a deal. But for the other (more northern) half, it’s generally a sigh of relief. The snow melts, the birds return, and people start venturing outside again. And some industries start cranking up. To give a good example, many outdoor construction projects are impossible with frozen earth, you see few motorcycles in the winter, golf courses are shut down, etc. These all awaken in the spring, meaning the regional economic engine starts to run again.  

Related to that is the mental line in the sand this month brings. Many companies will say “we’ll tackle that after winter”. Add in Daylight Savings Time, and you have a clear shift in overall demeanor. Spring is a season of rebirth, and that includes equipment financing. It’s time to spruce things up and modernize!

March is also the end of the first quarter. Many companies use the first quarter to predict where the entire year is going. Look at your own company – by this point, you probably have a decent indicator of what kind of year 2017 is going to be. This makes economic decisions (like financing new or used equipment) a little easier.

Some of the reasons I mentioned for earlier months are still valid in March – some companies may still have a few of “last year’s models” around at really deep discounts. And time is marching on (pardon the pun) – your Section 179 tax deduction increases in effectiveness, especially when you combine it with an equipment lease.

Let’s throw in St Patrick’s Day too. I can’t think of a good reason that ties that to leasing equipment, but it has green beer and shamrock shakes, so it’s definitely worth mentioning.  

So put the snow shovel away and think about financing equipment!