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Things You Need to Know about Construction Insurance

When most companies think of insurance, they typically only think of their general small business insurance policy. But, if you are a construction company owner or manager, there are a few extra things to consider.

The construction industry requires more insurance than other types of companies. This is because construction projects are considered higher-risk entities in the eyes of most insurers. While we know that you take safety seriously, coverage of different properties and expensive equipment calls for above-average premiums.

This article will give you a quick rundown on different types of insurance policies, specific to the construction space. You will also find out what kind of insurance comes with your purchased or leased construction equipment.

Must-have insurance policies for construction

We’ve listed the policies that are typically required or commonly considered as basic for a construction business. These policies will safeguard you from losses most of the time.

  • General Liability: This construction liability is pretty common, and the coverage protects your business if it’s responsible for anything like property damage, bodily injury or incorrect work.
  • Business Vehicle and Commercial Auto: Protects vehicles used in your business that transport tools and equipment. You can also add coverage to your policy that allows you to cover permanently attached equipment such as bolted toolboxes or racks. If you lease equipment, your lender will typically insure it for you. AFG provides default insurance as part of your lease, but you can always switch to the provider of your choice.
  • Workers’ Compensation: Covers employee medical costs and a percentage of lost wages if they get injured at work.
  • Professional Liability: helps to pay for alleged work oversights that cause a client to lose money. If someone says you didn’t deliver the promised services, they can ask you to pay for any losses. Professional liability can help cover the costs to defend your business and/or fix the problem.
  • Builder’s Risk/Course of Construction Insurance: This is property replacement coverage. This insurance is specialized property coverage that is applicable to buildings in progress. Your policy should be tailored for your business and project. Course of Construction insurance is another name it goes by. It is applicable to:
    • The restructuring of existing buildings, such as the addition of a staircase
    • The construction of a new building from the ground up
    • The renovation or refurbishment of an existing building

Why extra coverage is a good idea?

We understand that insurance premiums take a significant chunk of cash flow that could, potentially, be used in revenue-generating activities. Even though paying premiums isn’t necessarily amusing, additional coverage has its benefits.

  • Take the guesswork out of your budget. Knowing that almost every possible deviation from the plan is covered by the insurer enables precision in your budget. When your projects involve multi-million material, handling, and equipment costs, extra coverage will bring you peace of mind.
  • Safety sells. Developers are more likely to contract a reliable builder. Showing the extra coverage to your customer is a great selling point that will earn you serious projects.
  • Save time and money down the road. Insurance comes in handy when something goes awfully wrong. Sometimes, acknowledging and covering a mistake can be much easier on your business than a dispute in court.

Good-To-Have Construction Insurance Policies

Now that we’ve established the insurance solutions a construction company requires, here are some optional coverage opportunities to consider:

  • Pollution and Environmental Liability Insurance: Provides coverage if you’re liable for a pollution incident that occurs at a job site. If you bring chemicals or fuel tanks for refueling equipment onto a job site, it creates the risk for potential pollution to occur.
  • Inland Marine Insurance: The name of this policy may cause some head-scratching. The early days of moving goods from one place to another involved transport by ship, hence “marine insurance” was needed for the property on board. The term commonly used today is “floater”, a policy that covers gaps between other policies.
  • Contractor License Bonds or Surety Bonds: Some cities and states require that contractors obtain a license and permit bonds to ensure that customers receive the services and completed work that’s been promised. It’s a legally binding contract that also helps ensure that the contractor will pay for any materials and labor required to complete the job and not leave the customer holding the bill.
  • Cyber Insurance: One of the fastest-growing types of business insurance involves protecting your company’s data. As construction firms rely more heavily on technology the need to protect all that data increases.

How to choose a construction insurance policy?

Insurance companies are different. Some of them focus on a specific segment, for example, construction, others – cover all kinds of businesses. Here are a few things to take into account when selecting an insurance provider:

  • History and experience. Find out how long a company has been in business and if it has made the news recently. Companies with a proven track record tend to be more reliable and could offer better premiums & coverage.
  • Convenience and availability. If you have to wait on an 800 line, that’s a sign your claim could take a while to be processed. Timely payouts are crucial to the construction industry and other companies operating on the clock. Ask if you could be assigned a personal manager and if you could get their direct phone number and email address.
  • Cheaper isn’t always better. You are paying
  • Finally, coverage. Find out what exactly is covered and in what situations. For example, a worker breaking your company’s equipment is entirely different from a tree falling on the machine. Make sure you understand how coverage works and what your responsibilities are.

Consider using multiple insurers for different policies to achieve better coverage and lower your premiums.


Similar to insurance, equipment purchasing can be hard on the bank account. And just like insurance providers, choosing the right lender is crucial. AFG has been financing construction equipment and project costs since 1998. We understand the industry and the equipment used by contractors. Get in touch with your Personal Account Manager today to learn more about your funding options.

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The Sound of Small Business USA

The US is and has always been built on small businesses. Did you know the SBA’s 2019 report stated there are 30.7 million small businesses in the U.S. and they make up 99.9 percent of all U.S. businesses? That’s right. They contribute not only to employment, but to innovation and the global economy. 

There are many upsides of owning a small business. There’s the flexibility and empowerment of being your own boss. There’s the possibility of financial freedom without the restrictions of working for someone else. And of course, maybe most importantly, there’s the ability to follow your own passion and do what you love.

Of course as many of us know, freedom comes with responsibilities and risk. For instance, right at the outset, 50% of all small businesses fail. Not the best odds when trying to set up a career and future. Small businesses tend to be the hardest hit during times of recession. And it’s more difficult to attract qualified employees when you might not be able to offer the same level of pay or benefits as a large corporation.

Despite the potential downsides, the good news is that the future of small business looks promising. Most of the recent studies and statistics show a future of growth and expansion, which bodes well for business owners and the US economy.

Need proof? According to a Guidant Financial and the Small Business Trends Alliance (SBTA) Small Business Trends 2021 survey:

  • 49 percent of small business owners plan to increase staff and expand or remodel their business. 
  • 55 percent will pivot with the times by investing in digital marketing 
  • 27 percent will be investing in IT infrastructure
  • 22 percent will invest in business services such as using a third-party or software to help them manage payroll, accounting, or inventory.

The fact that businesses are planning to invest right now means they see opportunities for growth and feel confident committing time and resources towards that growth. This speaks volumes especially considering we are still in the midst of a global pandemic and most small businesses have not fared well over the past year. Plus, as so many of us know, the hardest part of growing a business is cash flow management

The future of small business requires capital. 

But how do you secure it? Bank loans can be cumbersome and tedious, especially for small business owners. And often, they don’t provide the benefits other options do.

Also, many of the small businesses that require capital don’t qualify for traditional bank loans. The banking industry’s risk management model does little to support and encourage small entrepreneurs. 

Larger corporations tend to be more diversified and therefore can navigate growing pains more easily. Whereas a small business owner might have to mortgage a house, for example, to expand or even just to keep the business going.

Banks tend to be a poor match for a small business owner. There are however alternative methods that can help you fund your growth:

  • Equipment Leasing: Leases can provide a great way to source new equipment without having to secure a loan. Plus, you can keep the loan option available for other important projects.
  • Business Line of Credit: extremely flexible since you can continue to reuse and repay as often as you’d like, as long as your payments are on time.
  • HELOC – Home equity line of credit: Often a viable option for small businesses. It can be a bit risky as it ties your personal assets to your performance in business. While the costs are low, you have to put your personal finances on the line.
  • Pay Cash: Can you liquidate assets? Have a family member who can provide funds? If so, cash can be a great option.
  • Private Short-Term Unsecured Cash Loan: Working capital loans are easy to secure and typically no collateral is required with an alternative lender. And since they draw capital from private sources, they can be more flexible with the lending opportunities they provide.

There are many benefits of alternative lending which has led to a rise in small private finance companies in the last decade:

  • Private lenders such as AFG understand the personal risks of a small business owner and offer solutions that help the business thrive.
  • Unlike banks, most private lenders do not impose blanket liens on the business. The equipment financed is the only collateral required to guarantee the deal. No need to put family finances at risk.
  • Creative payment options and finance structures that take a company’s seasonality and downtime into account.
  • Prompt, simple process – most private lenders will make their credit decision in 24-48 hours with little paperwork (banks may take weeks reviewing financial statements).
  • Tax deductions (often, you can deduct the full cost of qualified equipment purchases).

We believe in the power and strength of small business. This country was built on it and will continue to thrive because of it. Which is why AFG does what we do. We hope our support of small business is evident in the way we structure our own processes and the way we work with our clients. We truly want what’s best for them and work hard to ensure we meet their goals every time.

If you’re a small business owner that wants to grow, reach out and learn more about your options. Let us find a solution that works best for your business.

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How To Finance Equipment For Your Business Needs

We’ve all heard the phrase you have to spend money to make money…  

But really, it’s only true if you spend that money wisely. Investing money into something that doesn’t improve the outcome of your business won’t get you anywhere. 

We know that having the right equipment to power your business is important. The proper equipment can increase your productivity, lower your costs, or give you access to new markets – all things that positively affect the bottom line.

Would you partner with an IT firm with old computers and network servers? Or how about a frequent coffee shop without an espresso machine? Or hire a construction company without the machinery required to build reliable houses? Absolutely not.

Businesses require the right equipment, machinery, hardware, and/or software in order to operate, gow, and succeed. And the ugly truth is, not everyone has the funds to cover these expenses. There are a few different options out there to get to the money-making stage.

We’ve summarized various ways to fund business equipment needs, each with pros and cons. 

Your pocket – Using cash payment to buy the equipment

Pros : Using your cash reserves to purchase equipment and machinery makes the transaction simple and fast as there’s no lease or loan to enter into, and the new purchase is owned outright.

Cons : Since cash is a finite resource compared to credit, it is almost never a good idea to purchase large business items with cash. Companies that only use cash limit their access to major resources when they are needed.

A bank/credit loanBorrowing money to purchase a piece of equipment and paying it back over time.

Pros : For companies with a strong financial standing, it is easy to secure credit for a large purchase. Using credit creates more flexibility, allows expansion of purchasing power to readily respond to opportunities for growth and to proactively improve machinery and equipment.

Cons : Applying for a line of credit can take a while. It requires detailed documentation such as audited financial statements and involves numerous fees and a substantial down payment.

An equipment financing company (leasing) Signing an agreement that allows you to use specific equipment for a period of time.

Pros : Leasing provides a fixed rate upfront and equal payments month-to-month, which makes budgeting and cash flow management easier. Leasing companies partner with you and understand your needs. They specialize in working with industrial equipment, so they understand your business and the equipment in your space. It is a smooth process where a credit decision can be made in under 48 hours. You are able to upgrade when needed. Plus, you can eliminate maintenance costs with leased equipment. Bonus: There are also significant tax deductions available!

Cons : Are there any? We haven’t found them. Leasing just makes sense.

 

Once you’ve decided to move forward with leasing your equipment…now what? Choosing a lease structure! There are a variety to consider: 

  • Operating Lease – This is the traditional lease agreement that typically provides the lowest payment and is a good option for overcoming any current capital restraints.
  • Capital Lease – a lease classified by the lessee as a purchase, with a title transfer to the lessee at the end of the term. 
  • First Amendment Lease – The first amendment lease allows you to purchase the equipment at one or more predetermined points during the lease. 
  • Tax Lease – A lease in which the lessor, is the party that is considered the owner of the leased equipment for tax purposes. The lessor assumes both the benefits and costs of ownership including depreciation, while the lessee (you) can still write off the lease payment as an expense.
  • Synthetic Lease – A synthetic lease is structured so that it is treated as a capital lease (similar to a loan) for tax purposes and an operating lease (traditional lease) for accounting purposes. 

How do you know which option is best for you? It depends on your business and specific situation. Before you shop for an equipment lease, think about your monthly budget, how long you’ll need the equipment for, how you’ll use it, and when you’ll need to upgrade it. 

Several other lease structures are available through AFG – we offer seamless flexibility to our clients, knowing every situation is different and unique.

Shopping for an equipment financing and leasing company can be overwhelming. Take a step back and consider these factors when selecting the company that is right for your business.

  • Experience – How long has the company been in business? Who are their satisfied customers? 
  • Convenience – How simple is the application process? How soon do you have access to the funds? Do they provide a personal account manager to help you in this process or do you have to reach out to customer care?
  • Specialization – Which industries does the company specialize in? 
  • Reputation – Customer references and overall experience

Businesses can work with a provider that’s intimately familiar with their industry and cooperatively select terms and conditions that meet the unique needs of the business.

With a number of variables involved in securing financing for equipment, AFG is a great place to lease. It makes the process straightforward, clear and convenient. It provides services to a wide range of credit profiles and brings competitive story-based financing to the table. 

“When we need equipment financing, we call Brandon at Alliance Funding. He gets our deals done on time and on budget. What else could you ask for?” – Steve “Barney” Byle, Corporate Controller, Edge metals Recycling, Inc.

AFG can help you find a solution that makes sense for your business.

Start your application today →

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5 Ways for Business Owners to Reduce Their Taxable Income

The Internal Revenue Code allows for a wide variety of options to save money on taxes, encouraging entrepreneurs to create jobs and invest in thier businesses.

We do not recommend spending money for the sole purpose of reducing your taxes. However, you are likely to benefit from smart spending. Here are some popular solutions to lower your tax liabilities and save money for your business.

Tax Credits

The federal government offers tax credits and tax breaks that drive business owners to make decisions that improve the overall American economy. Actions such as hiring employees, creating an accessible environment for people with disabilities, shifting to emissions-free technologies, and even offering health coverage for employees can qualify you to save money on taxes.

Qualified Business Income (QBI) Deduction

You may qualify to deduct 20% from the QBI if your business is an S-Corp, a partnership, or a sole proprietorship. This deduction comes additionally to your regular deduction of business expenses. You could qualify if your taxable income is under $157,500. The amount goes up to $315,000 if you are filing a joint return with your spouse.

Write Off Bad Debt

Unfortunately, some customers may never pay for what they purchased on a note. The last quarter is the perfect time to identify those receivables and write them off to save money on taxes this year.

Fund a Retirement Plan (For Yourself and Employees)

Adding money to an Investment Retirement Account such as 401(k) and 403(b) free you from taxation up to a certain amount every year. The share of income put in an IRA is usually tax-free until you withdraw it. Consider consulting a tax advisor to make sure you qualify.

Section 179 and Bonus Depreciation

Business assets such as machinery, vehicles, and other equipment can qualify for a Section 179 deduction. This part of the IRS Code allows your business to write off up to $1,040,000 of the equipment cost in the first year. You can take advantage of this rule until you reach $2,590,000 for the year.

The additional bonus depreciation also offers a tax break of 50-100% on equipment cost. The current bonus depreciation rules are valid until January 1, 2023.

Please, note that you must put the newly acquired equipment in use by December 31 to take advantage of these tax benefits.

Note

Other restrictions may apply to the tax breaks explained in this article. Check if you are eligible with your tax advisor.

We Can Help

Alliance Funding Group offers equipment leasing solutions that qualify for Section 179 deduction.

Get a custom-tailored quote this year and save money on taxes.