The Basics of Financing Heavy Equipment

Businesses are as strong as the equipment they use to get the job done. Without reliable machinery, businesses cannot expect to finish jobs as efficiently and on time.

As you probably already know, most heavy equipment does not come cheap. For example, an average excavator costs anywhere between $100,000 and $500,000 depending on if the machine is new or used. Covering these costs can be difficult for several reasons considering most companies face cash shortages if jobs run over budget and cash flow is tied to wages, supplies and other operating expenses.

Whether you are looking to purchase new or used equipment or you opt to lease it, there is a high probability that you will want to consider financing heavy equipment to cover this huge expenditure.  

What exactly is a heavy equipment loan?

Heavy equipment loans are loans to buy or refinance heavy machinery for your business. With an equipment loan, you will own the equipment from the start of the term. Similar to a car loan, once you pay off the loan, the equipment can be used as equity to acquire other new equipment if needed for a collateral type loan.

Another scenario, at the end of the loan, you can arrange a sale leaseback agreement where you sell the equipment to the lender for cash then lease it.

Compared to most small business loans, an equipment loan can be easier to obtain given the underlying decision is based on the equipment value and your overall credit situation.

Since the equipment will be used as the primary collateral to secure the loan, you normally do not have to pledge other secondary collateral to secure financing. There can be tax benefits to owning equipment as well (consult your CPA).

How to get a heavy equipment loan or lease

- Make sure your credit profile is solid

One of the most important steps to getting a heavy equipment loan is to make sure that your personal and business credit is good. Research ahead of time and know your situation.

Got late car payments? Student loans in default? Late car payments? These things will delay or even hinder the heavy equipment loan process. Therefore, work to clean up your credit, fix any existing errors and ensure your report has no discrepancies.

- Have a solid business plan

Some lenders will look at your business plan and proforma statements to determine if you qualify for heavy equipment loan. In the business plan, describe your business extensively including the products and services. Detail the current cash flow and project a realistic yet aggressive set of goals for future growth.

Identify the socio and economic demographics of your target market and explain how your product or service will fulfill the needs of the market.

- Have cash flow statements ready

Showing the business cash coming in and going out in current terms is the best indicator to how your business is doing in the real world. Lenders consider cash flow statements when determining whether to approve a heavy equipment loan application or not.

Therefore, when applying for a loan, get your finances in order and ensure that both your business and personal financial statements are in order.  Some lenders even prefer audited or reviewed financial statements which can be well worth the expense.

We offer several heavy equipment financing programs that are designed to meet the specific need of most customers. Whether you are looking to purchase excavators for your construction business or other yellow iron, you can count on us to provide funding to acquire the equipment you need.  

Though we focus on established companies that have been in business for at least 3 years, we will also finance startups as long as they have sufficient assets to act as additional collateral for the loan. Our loan transactions range from $1 million to $55 million.

Having been in the heavy equipment finance industry for a long time ensures that our team has the experience to help you get a loan that fits your needs and is within your budget. Contact us today, let us know your requirements and we will be happy to help.

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