How To Get Construction Equipment Financing

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You could have a competitive advantage if you’re in the construction industry and have high-quality equipment readily available to complete jobs. However, acquiring equipment could strain your company’s finances and lead to serious cash flow issues. Or you can turn to construction equipment financing to land lucrative contracts and grow your firm without compromising its financial health. Read on to learn more about construction equipment financing, key benefits and drawbacks, and how to find the perfect loan for your construction business. 

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How Construction Equipment Financing Works

As the name implies, construction equipment financing refers to a secured loan product used to secure construction equipment. 

Loan amounts range from $5,000 to well over $5 million, and you’ll typically have between 1 and 5 years to repay what you borrow. The lender will determine the loan amount by the value of the equipment and can seize it from you to recoup losses if you fall behind on the payments. 

The interest rate you receive will depend on the lender. However, the most competitive rates are reserved for business owners with stellar credit scores. 

What You Can Use Construction Equipment Financing For

Construction equipment financing is generally used to acquire the following pieces of equipment: 

  • Backhoe
  • Bobcat
  • Bulldozer
  • Dragline excavator
  • Excavator 
  • Grader
  • Loader 
  • Paver
  • Tower crane
  • Trailer 
  • Trencher
  • Truck 
  • Wheel tractor scraper 

How to Qualify for Equipment Financing

The qualification criteria for equipment financing varies by lender, but you could be eligible if you meet these guidelines:

  • Be in business for at least one year
  • Earn at least $50,000 in annual revenue
  • A personal credit score of 650 or higher 

If you’ve been in business for some time and have a credit score of 620 or higher, you could also qualify for equipment financing. 

Keep in mind that the lender you select could have more or less stringent thresholds to determine if you qualify for funding. Ultimately, lenders want to be reassured that your company has the means to repay what you borrow on time. 

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Read this review about Lendio, a small business loan online marketplace to access a network of lenders with one simple application.
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Business term loans are a stable way to get funding to grow your business and improve your credit. Read how to get one through Lendio.

Equipment Leasing vs. Equipment Financing

Neither option requires you to come out of pocket to purchase equipment, but the two vary slightly. For example, when you lease equipment, you agree to make monthly payments for a set period and purchase or return it when the agreement ends. But when you finance equipment, it’s yours to keep when the loan term ends. 

Equipment Leasing Pros and Cons

Pros: 

  • Less stringent eligibility requirements
  • Fixed monthly payment 

Cons: 

  • Equipment reverts to the lessor at the end of the agreement 

Equipment Financing Pros and Cons

Pros: 

  • More affordable monthly payment 
  • Equipment is yours to keep when the loan is paid off 

Cons: 

  • Some loans have variable payments that increase over time

Equipment Financing vs. Equipment Leasing: Which is Better for You?

It would depend on several factors, including the type of equipment, the amount of time you plan to use it, how much it’ll cost to maintain and the resale value. If the equipment could become obsolete in the near future or your company is crunched for cash, a lease is more ideal. But if the equipment will be in use for some time and you’re looking to sell it at some point, equipment financing could be the better option. 

Construction Equipment Financing FAQs

Below are some frequently asked questions about equipment financing: 

How to qualify for a heavy equipment loan?

Generally, you’ll need at least one year of experience in business, a 650 credit score and annual earnings of $50,000 or more. However, you could be eligible for a loan with a credit score as low as 620 if you have been in business for some time. 

Is it cheaper to lease or buy construction equipment?

In most cases, it’s cheaper to purchase construction equipment. But opting for a lease could mean having more lax terms. 

What is the interest rate on an equipment lease?

On average, the interest rate on equipment leases is 6 to 15 percent. However, several factors play a role in the interest rate you’ll receive.

How to Apply for Construction Equipment Financing

Instead of spending hours searching and comparing lenders, you can use Lendio to explore offers from over 75 of the top lenders. All it takes is 15 minutes of your time to apply, and your credit score won’t be impacted. Here’s how it works:

  1. Step 1: Submit one simple application
  2. Step 2: Compare loan options and work with a Lendio team member to select the best fit.
  3. Step 3: Get approved, sign your loan closing documents and receive funds in as little as 24 hours. 

Apply today to get the construction equipment you need for your business.

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