IRVINE, CA—Last week, spoke with Eric Freeman, VP of SummitFunding Group here, abouthow commercialbuilders can finance the heavy equipment theyneed for their construction operations whilemaintaining financial stability in an age ofrising construction costs. Here, wecontinue our interview with Eric Freeman todiscuss how commercial buildings can remain competitive asconstruction volume ramps up next year.

| Forecastsshow that construction volume is set to increase in 2015. With somany companies in the market for financing, how can constructioncompanies remain competitive when seeking equipmentfinancing?


Freeman: When it comes to competingfor the best rates and terms, construction companies need anexpert. Engaging with a traditional banking institution and hopingthey understand your business is simply not a realistic approach.Instead, construction companies should work with someone who is notonly a finance expert, but also specializes in equipment finance.Having someone who understands the value of a business and thespecialized equipment that a company is seeking is really the keyto securing the most competitive financing.

| The potentialrise in interest rates has been a hot topic across all sectors.What rates are currently available for both short- and long-termequipment financing, and do you see these rates increasing in2015?


Freeman: For those companies withexcellent credit ratings, current rates for construction equipmentfor the short term can be as low as the 3% range, while long-termrates can be as low as the 4% range. Of course, borrowers must keepin mind that rates are always tied directly to a company's creditrating, and the better the credit rating, the better that rate.


That said, the Fed has already started the process of increasingrates by ceasing bond purchasing this year. We anticipate rateswill now increase 50 to 100 basis points in 2015. That means, evenfor those with exceptional credit, interest ratesmay reach closer to 5% in 2015.


Of course, interest rates are also directly connected to thestate of the economy. If construction volume does increase and theeconomy remains steady, then interest rates are sure to rise.However, if the economy hits a speed bump, rates are much morelikely to remain consistent, as they have in 2014.

| The demandand use of software and technology equipment is expected tocontinue to rise. How can companies finance this highly specializedequipment?


Freeman: The issue with software andtechnology equipment is finding lenders whounderstand its value. As a result, working with an equipmentlending company vs. a traditional bank is really the only way tofinance such specialized equipment. Banks are collateral-basedlenders, and as such, they focus on the value of the equipment thecompany is trying to finance. For specialized software andtechnology equipment, banks do not see the resale value and aretherefore unwilling to take on the risk of being stuck with thistype of equipment if a loan or lease defaults. On the other hand,equipment lending companies do not focus on the collateral value ofthe equipment. Instead, these specialized lenders focus on cashflow, determining if the company itself is worthy of the loan. As aresult, a company with strong fundamentals should have no issuesecuring the leas they need when working with these specializedlenders.

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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.