Construction companies and contractors often need to use heavy, expensive machinery to get the job done right.
Unfortunately, the upfront expenses associated with purchasing heavy equipment can be insurmountable for many small business owners. One of the best solutions is heavy equipment financing. This type of financing gives you the funds that you need to buy the used or new equipment that will help you grow your business. If you are not sure how to get the money that you need, here is what you should know about heavy equipment financing.
What Is Heavy Equipment Financing?
Just like financing a personal vehicle or other large expense, heavy equipment financing allows you to either pay to borrow the equipment for a set period of time or pay off the equipment over an extended period of time. When you are looking for heavy equipment financing, you can lease the equipment or get a loan to purchase it. Heavy equipment financing is distinct from regular equipment financing, which might cover items like computers, desks, file cabinets, and other items that would go in your office. Heavy equipment financing, in contrast, is solely used to purchase large pieces of machinery and equipment.
Can Any Business Apply for Heavy Equipment Financing?
Yes! Any business can apply for some form of heavy equipment financing, but the rates that they receive will reflect their credit worthiness, their cash flow, and their credit history. Different banks and lenders have different standards for heavy equipment financing and traditional loans. Three of the most common ways that businesses qualify for heavy equipment financing include:
- Placing a down payment that is equal to 15 to 20% of the cost of the equipment
- Providing documentation that shows healthy cash flow that will cover the payments required
- Demonstrating sufficient credit history and a credit score over 600, with some lenders allowing you to provide your personal credit score if you are new in business
Lenders and banks want to work with you to help you find the funding that you need. As a result, there are many different heavy equipment financing options for businesses with a variety of credit situations. Even if you think that you might not qualify, it is still a good idea to reach out to learn more and speak with someone directly who can give you advice. Remember that low or no credit will not automatically disqualify you from getting a lease or getting a loan. If you are willing to work with your potential lender and can offer a down payment or provide other proof that you can pay back the loan, there is a great chance that you will still be able to receive funding.
What Are the Differences Between Leasing and Financing?
If you decide to lease the equipment, you can anticipate your contract looking similar to the one you would receive for leasing a vehicle. You will operate the equipment and have possession of it, but ownership of the heavy equipment will remain with the lessor. When your contract concludes, you can sign a new one, return the equipment, purchase the equipment at a discounted rate, or lease something else entirely. The flexibility of a lease makes it a popular choice for companies that want to use heavy equipment that might become outdated quickly or that they will not use on a regular basis.
Loans are also an excellent way to get heavy equipment funding. A loan could be used for a variety of purposes, whether you need to repair equipment, higher staff, purchase building materials, or do a combination of all three. Depending on your financial situation, you can be approved for a great loan with competitive rates and terms that allow you to get the heavy equipment you need and pay it off over time. If you plan on using the equipment that you purchased heavily, a loan is a much better idea than a lease. At the end of your loan term, you will be the sole owner of the heavy equipment.
What Terms Are Included in Heavy Equipment Loans?
Heavy equipment loans often have very fair terms and costs because the equipment itself is collateral for the loan. If you are unable to make payments on the loan, the equipment can be seized and sold to pay off the balance of the debt. This is different from taking more general business loans that do not have an easy form of collateral.
When you secure heavy equipment financing, you can cover up to 100% of the cost of your equipment. If you have less credit worthiness or cash flow, you might only be able to receive a loan or financing for half of that amount. The term of the loan will vary depending on the anticipated lifespan of the equipment itself. It is very rare to see a construction loan have a longer term than the projected length of time the equipment itself will be used.
Because heavy equipment loans have more collateral involved, as the equipment can be seized and sold, interest rates for heavy equipment financing are very favorable. Working with the right lender to find the best possible rate is still a good idea. Heavy equipment financing is fairly straightforward, so you might even be able to have money in hand within a few days.
What Are the Minimum Requirements for Financing?
Depending on the bank and the lender that you choose, the minimum requirements for financing may vary. At Platform Funding, we require three recent bank statements for your business account, at least six months of business history, and average monthly revenue of $12,500 or more. During the application process, which is free and easy, you will get to work with one of our financing experts to find the right funding for your needs. Once you’ve spoken with your business funding specialist, we will design a program centered around your funding requests and preferred repayment terms. Once we have extended an offer and you have agreed to the terms, you will receive your funds. At that point, you can begin the repayment process and count on us for any future funding needs.
Platform Funding connects businesses of every size with the funding that they need to thrive and grow. To complete your application and learn more about our offerings, call us today at (866) 473-1455 to talk to a live representative or apply.