Navigating Rising Interest Rates: Strategies for Small Construction Companies

Small construction companies remain the backbone of the dynamic and challenging construction and infrastructure industries. Yet, when macroeconomic issues like rising interest rates enter the scene, it becomes even more complex and challenging for small companies. At RTL Equipment, we deeply appreciate the unwavering commitment of these businesses. With over 35 years of experience as an equipment dealer, having navigated numerous economic cycles, RTL is adept at offering strategies that empower small companies, and their owners, to confidently and profitably navigate these demanding times.

Study Programs: Take Advantage of Manufacturer Offers

Bobcat Sales ProgramsMost manufacturers have overcome the supply chain issues that plagued 2020 and 2021.  Now, inventory is available, and they are motivated to help dealers get machines out in the field. Both Bobcat and Develon have introduced impressive cash rebates, low financing rates, and extended warranties. If you have an older machine causing maintenance and downtime expenses, upgrading to a new model through these manufacturer programs with rates as low as 0% can be advantageous. New machines equate to reduced downtime, enhanced performance, and can increase profitability. To make the most of these offers, diving into the specifics is crucial. That's where RTL comes in - we're here to guide you through these opportunities, ensuring they align with your business objectives.

Focus on Utilization: Maximizing Machine Potential

The old adage "Time is Money" remains very relevant, especially when it concerns heavy machinery ownership. Each day, machines can either contribute to earnings or erode them, based on their utilization. Whether they're actively engaged at a site or idling in the yard, they either enhance profits or accrue costs. This significance grows even more pronounced amidst rising interest rates.

Even if a machine is entirely paid off, it still has an opportunity cost of ownership that increases when interest rates increase. All businesses have a finite amount of capital and that capital needs to be earning a return. Consider measuring your utilization rate for every machine in the fleet (the time that machine is being used to generate revenue divided by the total available time to operate) and make sure they stay above an acceptable level (typically around 75-85%)

Right-Size Your Fleet: Minimize Debt

Sold John Deere Skid SteerOptimizing a fleet of construction machines is a big part of running a construction business. As often happens, certain machines end up being underutilized and in an economy with rising interest rates with robust used equipment values, right sizing your fleet becomes a profitable move.

Selling underutilized machines can alleviate debt, trim interest expenses, and infuse essential liquidity into your operations. Owners and asset managers often hesitate to sell underutilized machines because they may need the machine in future. Despite that being a natural concern, the financial math typically points to selling the machine. And now with dealerships having inventory, it's a great time to rent or lease new machines that don't cost a single dollar in interest.

Finally, consider a Rental Purchase Option (RPO) for machines that you need now but are unsure about long-term utilization.  RPOs are a great way to gain equity in a machine while you rent. Lean on RTL Equipment to help you value your fleet and offer various sales, rental, lease, and RPO options.

Maintenance Continuity: Safeguarding Return on Investment

Machine maintenance is always important, but in a landscape of rising interest rates, maintaining your machines becomes even more important. Regular maintenance reduces downtime, increases utilization, and preserves the value of the machine whether you keep, sell, or trade the machine. Lean on RTL Equipment for help with machine maintenance.

In Conclusion: Navigating Together

For small construction companies, rising interest rates require strategic thinking and the right financial and equipment partnerships. RTL is committed to serving as a resource as you navigate this evolving landscape. Wayne Kempf, Sales Manager of RTL Equipment, emphasizes, "Our interests are aligned with our customers'. We want them to be as profitable as possible and optimize their capital usage." By placing emphasis on utilization, assessing your fleet, capitalizing on financing programs, prioritizing maintenance, and collaborating with RTL - a dealer focused on relationships - you're poised to emerge stronger in the face of these challenges.  

Contact RTL Equipment for all of your new and used equipment meets! Let us show you how we are Driven by a Culture of Service.