SUMMARY: Learn about construction equipment loans and how go about getting one for your business needs.
Whether you run a construction business or you're hoping to start one, having the right equipment and machinery is essential to success. While heavy equipment leasing is certainly an option, for most construction business owners, the best and most efficient use of working capital will be purchasing the type of equipment needed.
Few companies can afford to buy a new or used bulldozer, forklift, tractor, skid steer, or excavator outright, but there is construction equipment financing (also called heavy equipment financing) available. Find out more about exactly what a construction equipment loan is and what borrowers need to know to secure one.
Financing Options for Heavy Equipment Loans
When it comes to financing options to obtain used or new equipment, the following are the most common:
- Purchasing outright. This option will be the cheapest overall because no interest or monthly payments for leasing will be collected. However, it is outside most large and small businesses' reach.
- Leasing. With a leasing option, there's no down payment or collateral needed upfront. Instead, this financing solution requires a contract and monthly payment for a preset amount of time. At the end of the lease, the lessee usually has the option to 1) renew the lease, 2) give up the equipment, or 3) buy the equipment at its current market value.
- A construction equipment loan. For business owners who don't want to lease, financing heavy equipment with a construction equipment loan is a good choice. Many lenders even offer online applications to apply for a loan to purchase equipment, saving business owners time, and expanding their loan options beyond their location.
How to Get a Construction Equipment Loan
For companies in the construction industry, getting a construction equipment loan is relatively straightforward. Even borrowers with what would be considered less than optimal credit can qualify for one because the piece of equipment acts as collateral. While every lender is different, borrowers can almost certainly qualify for a loan if they:
- Can show why their business needs the equipment
- Have been in business for at least two years
- Can show financial statements (such as bank statements and tax returns) that indicate good cash flow and responsible business practices
- Have a good credit score
- Can provide a down payment