While most contractors are generally not directly involved with the financing of a construction project, understanding the process of financing and how it relates to a construction business is extremely important. The following outlines many of the most common sources for obtaining construction loans.
Commercial Banks:
Commercial Banks make single-family short-term and a limited number of long-term loans. They are generally the largest construction lenders on multifamily and commercial projects. They also make short-term loans to mortgage banks and to real estate investment trusts (REITs).
Savings and Loan Associations:
Savings and Loan associations are the largest of all lenders of both construction and permanent or long-term loans on single family housing. They also make a considerable number of construction loans for multifamily residences such as apartment houses and condominiums.
Mutual Savings Banks:
Mutual Savings Banks are generally located within the northeastern United States. Their mortgage investments are
generally concentrated in single family permanent mortgages. They tend to make only a limited number of construction loans, but do make long-term loans to mortgage bankers and to real estate investment trusts which in turn make construction loans.
Mortgage Banking Companies:
Mortgage Banking companies make a significant number of loans for construction and land development but are mainly intermediaries between borrowers and lenders.
Life Insurance Companies:
Life insurance companies do a minimum amount of temporary construction lending. Their principle commitments are long-term loans on commercial and multifamily projects.
Real Estate Investment Trusts:
These trusts provide long-term mortgages on commercial and multifamily projects and a limited amount of construction loans.
Government Agencies:
Approximately every sixth house built in the United States is financed by the GI loan program. The Veterans Administration (VA) makes construction loans on housing for veterans, their dependents, and other beneficiaries of deceased veterans. The Federal Housing Administration (FHA) insures mortgage loans made by approved lending institutions, however, FHA does not lend money.
Other Sources for Loans:
Finally, miscellaneous sources of loans which should not be overlooked include individuals, syndicates, service organizations, and Community Housing Authorities.
Lenders need assurance that a contractor is financially responsible, of good character and reputation, and able to carry out
the work stipulated in the specifications and construction documents.
A full financial statement from the contractor stating his or her assets and liabilities, investments, property owned, life insurance and other pertinent information, including a credit report is generally requested by the lender. In addition, a complete set of drawings, plans, and specifications as well as the names of all the subcontractors and their specific tasks are also generally required.
Finally, the lender appraises the site of construction and compares it with the contractor’s final cost estimate. Once this is in place, the lender submits the application to the loan committee for approval.
Some cost estimates for bidding on construction projects are made that do not contain errors of one kind or another. Too many errors on the plus side can be a major reason for a bid not being competitive. Too may errors on the minus side can cause the contractor to lose money if awarded the contract.
Below are some of the common sources of errors in construction cost estimating:
Errors in arithmetic: Estimates made on construction projects are arithmetical calculations of quantities and cost of materials and labor costs to install materials or perform various operations. In order to avoid errors in arithmetic, the estimator should use an electronic calculator with a recording tape, have the calculations checked by another person, and attach the tape to the estimate sheet for backup.
Taking Wrong Measurements from Plans and Specifications: Errors in measurements and dimensions taken from plans, drawings, and specifications result in corresponding mistakes in the cost of construction items based on those measurements.
Using the Wrong Wage Rates for Labor: Hourly labor wages for construction workers vary countrywide. You should
consistently verify current wage rates and fringe benefits for the building trades involved through local union offices, other contractors, supply yards, and other reliable sources. Overtime rates are generally one and one-half to two times regular rates depending on labor agreements and union rules.
Insufficient or Excessive Allowances for Labor: A frequent cause of error in estimating is allowing too much or too little for labor to do the job.
Materials and Supplies Improperly Priced: Always be sure that building materials and supplies are correctly described as to kind, quality, size, and dimensions. Also confirm that they are priced competitively.
Using Incorrect Units of Measure: Using a wrong unit of measure can result in substantial cost increases or decreases. For example, be careful not to record lineal feet for lineal yards, square feet for square yards or cubic feet for cubic yards, and so forth.
Including Poorly Maintained Machinery or Equipment: Machinery or equipment to be used in construction, and included in the estimate or bid, must always be checked for efficient serviceability. Preparing an estimate on a construction project and contemplating the use of poorly maintained machinery or equipment is unwise. Breakdown, repairs, and idle time can be costly, delay completion of the project and invite penalties.
Failure to Visit the Project Site: This souce of error might well be number one on the list because of its importance in the early stages of cost estimating. Visiting the proposed site of the project enables the cost estimator to inspect topography, check the soil by boring if necessary, determine if protection of adjacent properties will be needed, and check distances to railroad sidings, supply centers, and the proximity to sources of labor. If existing structures have to be demolished or
removed from the premises, the estimator is able to properly determine the probable cost.
Overlooking or Miscalculating Haulage Costs: The cost of hauling materials, supplies, machinery, and equipment to a project can be a very expensive item in an estimate. Access to the job site may be difficult because of poor roads or no roads, heavy traffic to and from supply sources, or the requirement to obtain permits, and so forth.
Failure to Review Building Codes, Permits, and Inspections: Cost estimates and bids on construction projects are subject to local, state and federal building codes, permits, and inspections.
While cost information for specific equipment operations generally varies depending on region, there are certain factors that affect cost regardless of location or ownership. Equipment management takes into account the combination of these factors. Good equipment management must incorporate a carefully planned and well-executed program where all personal both understand and acknoweledge their responsibilities.
The first step is proper equipment selection. This means selecting the equipment that matches job conditions and gives the lowest total cost. Lowest total cost is a combination of highest production, lowest operating cost, and lowest investment cost. Buying equipment based entirely on purchase price or production seldom results in lowest total cost.
Total cost can be expressed per unit of time or per unit of production. Since most jobs are bid on the basis of yards of dirt moved, pounds of steel erected, or yards of concrete placed, the most meaningful cost for the selection is based on production units. Maximum production must be evaluated in the contect of job conditions. For example, a 10-yard loader will outproduce a 5-yard loader, but if the job caonditions call for 5-yard capacity, the 10-yard machine should not be considered.
A new machine must also be evaluated as to ease of servicing to ensure that service downtime will not reduce available time for productive use. 
Important factors include the number of grease fittings and sealed bearings, the location of filters, and replacement of cutting edges and other wear items. Also important is the ability to remove a major component and replace it with a new or rebuilt component, so the machine can continue to operate with minimum downtime.
To assure lowest cost, the question of rental vs. purchase must first be analyzed. Rental of equipment can be beneficial, particularly for short periods, but the rental period must be determined beforehand. Renting equipment also allows evaluation of different manufacturers. If, in the value analysis, two or more manufacturers rate very closely, short-term rental will allow first-hand evaluation of production and establish actual operation costs.This information is beneficial in later purchase selection of equipment.
If the decision is to purchase, then a choice between new and used equipment must be made. The advantage of purchasing used equipment is lower initial investment, and therefore lower hourly depreciation for the new owner, because new equipment depreciates most rapidly on the first few thousand hours of operation. However, with used equipment more repairs will be required and more downtime should be expected. Used equipment may also become obsolete quickly because of major improvements.
Proper financing must be arranged for purchase. If cash is available, it can be used. However, elimination of interest cost may be offset by the value of cash kept on hand for emergencies. Financing can be arranged through commercial banks, commercial and dealer financing, or leasing. There is no way that is best for all circumstances.
To yield maximum profit, equipment must be properly operated by keeping it on the job and eliminating abuse and misuse. Proper service and maintenance keeps equipment working at peak efficiency; so service and maintenance should not be looked as a drain on income. Rather, they should be considered a contribution to output. The key to a good service and maintenance program is preventive maintenace. This includes the mechanical adjusting and tune-up of equipment and the detection and correction of small problems before they become major problems.
Preventive maintenance is the mechanical adjustment and tune-up required to keep equipment operating at peak efficiency. It involves seeking out and repairing minor defects before they become major problems. In practice, this involves daily visual inspections directed at finding obvious signs of possible trouble, for example, oil or coolant leaks, tire and track wear, structural cracks, cutting-edge wear, and excessive engine smoking. Items requiring attention should be reported. Repairs which are required must be scheduled first on the basis of the repair and then on their compatability with operating requirements. For example, a leaky radiator must be repaird immediately, while an engine using too much oil can continue to work until it can be scheduled compatibly with operations.
Records must be kept to provide information for planning maintenance and replacement activities so that they occur at the proper time. Records clearly establish the equipment’s productivity, problem areas, and repair costs. The equipment cost must be related to specific cost items to provide good background information for future use. Proper management of equipment requires a detailed inventory of all major items. This should include the manufacturer, model, year and number, attachments, and a list of the major components and parts required for normal service. This record should also provide a place to list major repairs.
A contractor who is going to continue to be successful in getting new jobs must have a well-planned equipment-replacement policy. As equipment ages, production falls vecause of increasing downtime. More downtime means more repairs and expense. And more efficient new machines may be introduced by manufacturers so older models may become obsolete long before they are worn out.
Good equipment management requires that everyone share the responsibility. The equipment department must make the best equipment selection and follow up on the problems encountered. The purchasing department, on the other hand, must procure the equipment at the best price. Finally, the field operators and mechanics must make sure the equipment is properly operated and cared for.
The decision to bid or not bid a project is often times one of the greatest dilemmas a contractor faces following an inquiry to bid. Often times, the immediate temptation is to bid on most projects that become available in order to keep work coming in and avoid idle production.
Yet the decision to bid on a construction project which is not suitable for a particular company can have costly ramifications not only financially, but could just as well damage the future credibility of the company. Often times, passing up on the opportunity to bid on a project is the best decision a builder can make.
How then, does a contractor faced with this dilemma make an informed decision whether to bid the job? While there is no clear cut answer to this question, the builder should consider the following after receiving the bidding documents and reviewing the project:
Competition: Who else is likely to bid this job? How many bidder will there be? Are the bidders equal, or are they smaller contractors with lower overhead ?
Nature of the job: Is the firm capable of building the project? Has the company done any similar work in the past? Do the
firm’s superintendents and project managers have the right kind of experience to handle the job?
Market conditions: Is the job extended over a long period? Will there be many unknown factors such as labor rates, material prices, or other prevailing economic conditions which may upset the project?
Firm’s previous experience with the owner or architect: Has the company done any work with them in the past? Has the relationship been satisfactory? Are they a good client or a good architect? Would it be prudent to work for them again? Is the company obliged to submit a bid due to this past relationship?
Cost to prepare a proposal: Does the probability of getting the job warrant the cost of preparing the proposal? What are the chances of winning the job at a reasonable profit?
All of these factors should be considered in a logical way in order to reach a decision to bid or not bid a job. It is also important that the contractor pursue this thinking as early as possible and reach a firm decision in order to allow as much time as possible for the estimating staff to prepare an accurate bid.
Good planning and sound decision making during the bidding process can make the difference between a successful project and an unsuccessful one, but the decision to bid or not bid a project is arguably the most important factor in the success of a business
Changes in labor wages or productivity, labor shortages, increased cost of materials, delays in deliveries, accidents, weather conditions, etc., will affect both the cost and the original schedule. In all likelihood, both the cost and time will be greater than planned, scheduled, and estimated.
Bar charts or Critical Path Method planning systems are ideal for project control by timely updating. Maintaining a cost control system enables the contractor to analyze the productivity of workers, the performance and efficiency of equipment, and the proper allocation of overhead expenses.
Bar charts show the activities of work and a calendar covering the start and estimated completion dates of a project. Bar charts have been used for many years in scheduling construction, but are limited in clearly showing the relationship between activities.
The Critical Path Method is a more advanced system for planning and scheduling than using bar charts. It graphically
shows each activity and its interrelationship from start to completion with other activities. The CPM also shows the status of a project at any time.
Another major component in a project cost control system is an identifying set of cost codes for the many items of work that comprise a job. The Uniform System for Construction Specifications, published by the CSI serves as an ideal cost code system for both bidding and accounting purposes.
Cost control accounting and progress estimating are also necessary functions in project cost control. In addition to bookkeeping, including the recording of accounts receivable, accounts payable, payroll, taxes, and other financial accounts, progress estimating also requires the appointment of a responsible superintendent, regular job meetings to discuss problems and solutions, the determination of work quantities produced, a continuous analysis of project costs, and the filing o
f meaningful daily and weekly progress reports.
Job meeting reports allow for the documentation of daily activities of the work force, number of workers in each trade on the job, scope and quantity of work produced, recording of delays along with reasons why, materials and equipment deliveries including shortages, substitutions, or failures, and the recording of decisions made at the meetings or instructions received.
A reliable cost control system allows for changes as a project progresses. If construction costs are running higher than the bid estimate, or are different than scheduled, corrections can be made while the project is still in progress, therefore increasing the chances that a project will be financially successful.
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According to this, KOAMI makes every effort to strengthen brand new step of machinery marketing with better advertisements and more buyers.
Locate a professionally accredited appraiser before disclosing any confidential or sensitive information. Ask other types of appraisers for references if necessary. Verify that the professional designation is the result of testing and other significant criteria, and requires continuing education. The designation is evidence that the appraiser is a professional and serious about his profession. Some non-professional appraisers provide this service only as a sideline or part time, and are limited in scope regarding valuation theory and methodology. Avoid an appraiser who implies advocacy, or who bases his fee on contingencies such as percent of value or outcome of transaction, as these are normally considered unethical within the profession.
Define the appraisal question, property to be appraised, premise of value, how the appraisal will be used, possible
implications to third parties, etc. A competent and accredited appraiser will maintain a professionally confidential relationship, so do not withhold information. If the appraiser is well informed, he should be able to provide a firm quotation and proposal prior to engagement.
Ask for a copy of his/her qualifications, looking for evidence of professionalism and experience in valuation. It is not always important that the appraiser have a track record with the specific industry or type of equipment, since his expertise is in valuation of machinery and equipment in general, not within a narrow specialization. It is not necessary to know how to repair or operate the equipment to estimate its value. It is possible that an estimate of value will be more objectively obtained if the appraiser must investigate the current market, versus using only his limited personal and possibly out-dated experience. However, an appraiser holding a professional designation within an area of specialty is advantageous, since 
the academic as well as technical aspects will be united. This would apply to such areas as aircraft, maritime, classic autos, etc.
Watch for and avoid the possibility of a conflict of interest. As an example, a used equipment dealer who might have a subject property owner as a present or potential customer may not be the best choice for an impartial opinion of value. A liquidator serving as an appraiser “guaranteeing” his appraisal could tend to be overly conservative due to anticipation of profiting from a future sale.
Purchasing heavy equipment is a necessary part of the construction business, but the steep asking prices on just one crane, dump truck, excavator, skid steer, loader, tractor, or any number of heavy equipment pieces that your business will use in its daily operation could easily finance an entire home construction project. Any time one of your employees points out that you need new machinery, you cringe, right? Then it’s time to take out the accounting books and see how you can afford new construction equipment.
Need a crane? Be prepared to spend around $250,000 or more for a brand new crane model. How about an excavator? It’s relatively cheaper at around $25,000-50,000. A brand new skid steer costs around $25,000. Buy a new dump truck and you could easily be spending hundreds of thousands—if not millions—for a really big heavy dump truck.
That’s why buying used machinery can save your company so much. A used crane can cost as little as $75,000. A used excavator can cost $17,000. What about a used skid steer? An asking price of $10,000 or even $6000 for a used skid steer is not unheard of. Used trucks start at as little as $3500. Depending on the size of the used dump truck you have in mind, your company could pay only $2500. Since a dump truck tire alone can cost $40,000 if the heavy dump truck is big enough, it might be more economical to replace the entire dump truck than replace the tires!
How do you find prices like these and better on used heavy equipment? By searching for a reputable third-party used heavy construction equipment classifieds website to act as mediator between buyers and sellers.
If you’re looking to buy used heavy equipment or any other kind of used machinery, try a reputable online classified website You’ll find classifieds for used heavy trucks, used excavators, used skid steers, heavy loaders, heavy tractors, cranes, and many used heavy construction equipment pieces. Search for used heavy equipment by manufacturer and machine type.
Many of the used construction equipment prices are negotiable, so you could easily get a deal on a used excavator, used skid steer, used dump truck, or any other piece of used heavy construction equipment for far less than the prices listed. Don’t see the used heavy equipment you’re looking for? Place a Want Ad with a description of the used construction equipment you want and your price range!
Purchasing heavy equipment, even used heavy equipment, can consume a large amount of funds. When heavy dump trucks, cranes, or any other heavy equipment is on the fritz, some construction companies might just need to borrow some heavy equipment for a short time while their heavy equipment is being fixed.
New heavy construction equipment can cost so much of your construction company’s funds that even the best jobs can turn little profit. While quality machinery is of course essential to any construction project’s success, quality used machinery is easy to find with the right classifieds website. Before you buy new, buy used heavy equipment and save the accounting books at your construction business from going into red!