Secure bonding and finance equipment now to be ready for future projects
Faced with an irregular flow of work and thin margins, construction businesses survived the recession by reducing expenses and operating leaner. Companies had to cut staff, lease rather than purchase equipment and pay higher-interest debt. Running a tight operation is always wise, but business owners also need to be prepared and ready for growth when new opportunities arise.
The economy and the construction industry still face challenges, but the stream of construction projects should increase through 2012 as more companies invest in infrastructure. Politics, government funding, regional recoveries and decisions about how long repairs or replacement can be deferred will all impact the amount of new projects we will see in 2012.
To be ready when projects roll in, construction business owners should secure a solid bonding company, develop a strong banking relationship, and build a partnership with an equipment leasing and financing specialist.
Those owners prepared for the future will have a much better chance of securing projects.
Bonding Companies
Bonding should be an advantage, not a limitation. Public projects require bonding, and bonding capacity increases the number and size of available opportunities. As businesses step up to larger projects, they must think ahead and ensure that current and future needs meet the upper limits of their bonding capacity.
To have a successful bonding relationship, you must have good communication. The bonding company should have a deep understanding of your business and help assess and price a job. In turn, you should discuss any concerns and work cooperatively to address any issues.
Securing bonding also provides a great opportunity to get your fi nances and operations in order since they will be evaluated at every step of the process. Your banker and specialty equipment leasing and fi nancing partner can work with you to organize your balance sheet before the bond underwriting process begins.
Banking Relationships
You will find cautious lenders in the current environment. In general, they look for companies that have a history of successfully bidding on public works projects, a broad geographic base (so they do not depend on a single local economy) and proven management experience that has served them well during the downturn.
You must establish a banking relationship before you need it, especially when you rely on your bank to be fl exible as you prepare to bid on projects. Whatever type of lending you need— from working capital to a line of credit— the banker should ask tough questions. Your banker should be impartial and look at your management team and work crew, equipment or access to equipment and your company’s experience and expertise for the particular job.
Your banker has to be sure your company understands the cost and scope of the work and that it has been priced accurately, including factoring in a good margin. The banker wants to know if you can successfully complete the job and meet your fi nancing obligations.
Equipment Leasing and Financing Experts
Since gearing up for new opportunities almost always includes buying or leasing equipment, you should prepare by securing the right equipment on the most favorable terms. Having fi nancing in place helps determine the actual cost of a project and adds a layer of certainty for the bonding company and bank.
Equipment leasing and fi nancing specialists add value by being fl exible and offering a wide range of options, making it possible for construction businesses to compete for more jobs. Options may include leasing or buying, different types of financing, leasing with an option to buy and repayment choices, such as the ability to pay seasonally. They can also structure leases, sales or fi nancing to maximize tax advantages.
Overall, the equipment specialist can help your business run more profi tably by creating a tailored solution. In some cases, it may be cheaper to lease and maintain new equipment rather than own and maintain older equipment. In other cases, it may make sense to lease with an option to buy. Obsolescence and new or green regulations can also affect this decision.
The equipment specialist can also advise you on tax considerations, from triggering the alternative minimum tax to the effects of depreciation. And they can help business owners take advantage of the low interest rate environment and refinance.
The specialty partner can help a business get the necessary equipment while controlling costs and gaining tax advantages.
Cautious Optimism
While the economy and the construction industry have not turned around significantly, infrastructure remains an opportunity. Companies that have survived the recession should take advantage of this. To maximize your chances, get your bonding and fi nancing in place well ahead of time. Be cautiously optimistic, and focus on preparation to be ready to act quickly and intelligently when new opportunities arise.
