Demolition Contractor Converts Rental Fleet to Improve Cash Flow

Customer had been renting nine large excavators with grapple and shear attachments for a period of two years at a cost of $130,000.00 monthly and was seeking to convert the entire pool of assets to a purchase before their year-end. The vendor’s captive finance affiliate was unable to support the request for funding, and their bank had reached its exposure limits.  

Situation

CONVERTING THE 9 RENTED EXCAVATORS WOULD LEAD TO SIGNIFICANT SAVINGS AND CASH FLOW IMPROVEMENT

Despite revenue growth, profitability was negatively impacted as net income from operations decreased, and in the previous fiscal year, this company recognized a large loss attributable to one project that took far too long to complete. As a result, the company learned several lessons and implemented various changes and modified their internal operations going forward.

Download the case study to learn more about how this demo contractor was able  to improve its monthly cash flow by converting its rental fleet to purchases.

The contractor elected to convert this pool of rental assets to a purchase for a variety of reasons, first and most importantly, they hoped to recognize significant cash flow savings once the units were purchased as compared to their current rental payments. Second, they were confident in the overall amount of work they could get over the next two years, as well as the awarded projects already in hand. Third, they did not want lose the equity they had already built in the rented assets by returning them to the vendor. Finally, purchasing and financing these assets would improve their profitability.

The company principals were willing to share what had transpired in the past as well as the changes they had made to assure profitable results in the current fiscal year and into the future.

They needed a lender that would:

  • Understand the basis for the loss in the previous fiscal year as well as the numerous operational changes made to assure profitable performance going forward.
  • Offer flexibility in structuring a transaction that would address the cash flow impact of the purchase for the company.
  • Respond quickly and offer rapid decisions at all levels of the organization.
  • Be familiar enough with their industry to understand the value of their existing equipment and cash flow needs.

Solution

PURCHASING EQUIPMENT PRESERVED EQUITY AND IMPROVED CASH FLOW BY $40K PER MONTH

CCG structured a loan that accomplished the following:

  • Funded the entire rental pool of construction equipment, improving monthly cash flow by $40,000.00
  • Structured the repayment schedule to better meet their monthly cash flow projections
  • Provided a structure that required a nominal down payment which further addressed cash flow concerns
  • Allowed the company to build equity in the equipment which they could rely upon in the future