Buying heavy equipment is one of the biggest investments you'll make in your construction, excavation, or contracting business. Whether you need an excavator for a major project, a bulldozer to expand operations, or a loader to replace aging equipment, coming up with $100,000+ in cash isn't realistic for most businesses.
That's where heavy equipment financing comes in. Instead of draining your cash reserves, you can spread the cost over several years while the equipment generates revenue. But navigating the world of equipment loans and leases can be overwhelming.
This guide walks you through everything: how financing works, loan vs lease options, approval requirements, interest rates, finding the right lender, and avoiding common mistakes. By the end, you'll know exactly how to get your heavy equipment financed.
Free Heavy Equipment Financing Calculator
Model loan payments, lease costs, and ROI for excavators, backhoes, skid steers, and dozers. No signup.
Use the CalculatorIn This Guide
- 1. Heavy Equipment Financing Basics
- 2. How Does Heavy Equipment Financing Work?
- 3. Loan vs Lease: Which Is Better?
- 4. Financing Requirements
- 5. How Much Does It Cost?
- 6. Financing with Bad Credit
- 7. New vs Used Equipment Financing
- 8. Where to Get Financing
- 9. Tax Benefits & Section 179
- 10. Common Mistakes to Avoid
- 11. Frequently Asked Questions
- 12. Next Steps
Quick Overview: Heavy Equipment Financing Basics
Heavy equipment financing is a specialized loan or lease designed for purchasing construction equipment, excavators, bulldozers, loaders, graders, and other large machinery. Instead of paying the full purchase price upfront, you make monthly payments over a set term.
The equipment itself serves as collateral, which means you typically don't need additional collateral or business assets. This makes approval easier compared to unsecured business loans.
Typical Loan Amounts
$25,000 - $1,000,000+
Depends on equipment type and age
Typical Terms
36-120 months
3-10 years depending on equipment life
Down Payment
10-30%
Based on credit and equipment
Why finance instead of buying outright? Three main reasons:
Quick stat: According to the Equipment Leasing and Finance Association, 80% of U.S. businesses use some form of financing to acquire equipment. You're not alone in choosing to finance.
How Does Heavy Equipment Financing Work?
Heavy equipment financing follows a straightforward process. Understanding each step helps you prepare and speeds up approval.
The Application Process (5 Steps)
Step 1: Choose Your Equipment
Identify the specific equipment you need. Get a quote or invoice from the dealer. Lenders need to know the exact make, model, year, and purchase price. For used equipment, they'll also want photos, inspection reports, and maintenance records.
Step 2: Gather Documentation
Most lenders require:
- • Last 2-3 years of business tax returns
- • Current profit & loss statement
- • Balance sheet
- • 3-6 months of bank statements
- • Equipment quote or invoice
- • Business license and formation documents
- • Personal financial statement (for business owners)
Step 3: Submit Applications
Apply to 3-5 lenders to compare terms. Most applications take 15-30 minutes. Online lenders offer the fastest process, while banks may require in-person meetings. The lender will pull your personal and business credit reports.
Step 4: Review Offers & Choose
You'll receive offers within 1-5 business days. Compare interest rates, terms, down payments, monthly payments, and total cost. Read the fine print for prepayment penalties, hidden fees, and end-of-term options.
Step 5: Close & Get Your Equipment
Once you accept an offer, you'll sign the financing agreement. The lender pays the equipment dealer directly. You take possession of the equipment and start making monthly payments. The entire process typically takes 7-14 days from application to equipment delivery.
What Lenders Look For
Heavy equipment lenders evaluate four main factors:
Credit Score
Both personal and business credit scores matter. Higher scores (700+) get the best rates. Scores below 650 face higher rates and larger down payments.
Time in Business
Most lenders prefer 2+ years in business. Startups can qualify with some lenders but expect higher rates and down payments (25-30%).
Revenue & Cash Flow
Lenders want to see consistent revenue and positive cash flow. They'll calculate your debt-to-income ratio to ensure you can afford payments.
Down Payment
Your ability to put money down shows skin in the game and reduces lender risk. Larger down payments (20-30%) can offset weaker credit or financials.
Timeline Expectations
From application to equipment delivery:
- • Day 1-2: Submit application and documentation
- • Day 2-5: Lender reviews and makes decision
- • Day 5-7: Review offers and sign agreement
- • Day 7-14: Lender pays dealer, you get equipment
Loan vs Lease: Which Is Better for Heavy Equipment?
Choosing between an equipment loan and a lease is one of the most important decisions. Both have advantages, but the right choice depends on your business situation, tax strategy, and how long you plan to use the equipment.
| Factor | Equipment Loan | Equipment Lease |
|---|---|---|
| Ownership | You own it after final payment | Lender owns it (option to buy at end) |
| Down Payment | 10-20% typical | 0-10% typical |
| Monthly Payment | Higher payments | 20-30% lower payments |
| Tax Benefits | Section 179 deduction + depreciation | Lease payments fully deductible |
| Total Cost | Lower total cost | Higher total cost (convenience premium) |
| End of Term | Keep equipment, no additional cost | Return, buy out, or renew lease |
| Flexibility | Own it, do what you want | Easy to upgrade to newer equipment |
| Best For | Long-term use, building assets | Short-term needs, preserving cash |
When to Choose an Equipment Loan
An equipment loan makes sense if you:
- Plan to use the equipment for 5-10+ years
- Want to build business assets on your balance sheet
- Can afford 10-20% down payment
- Want to take advantage of Section 179 tax deductions
- Prefer to pay less total over the life of financing
When to Choose an Equipment Lease
An equipment lease makes sense if you:
- Need to preserve cash flow for other business needs
- Want lower monthly payments to manage cash better
- Like to upgrade to newer technology every few years
- Have limited cash for down payment
- Need equipment for a specific project or time period
Real-World Scenarios
Scenario 1: Loan is Better
Example: You run an established excavation company and need a $200,000 excavator to replace aging equipment. You plan to use it for 10+ years. You have $40,000 for a down payment and want to maximize tax deductions this year.
Best choice: Equipment loan. You'll own the excavator, deduct the full $200,000 with Section 179, and pay less total cost over time.
Scenario 2: Lease is Better
Example: You're a newer contractor who landed a 2-year commercial project requiring a $150,000 wheel loader. You need to preserve cash for payroll and materials. You're not sure if you'll need this size equipment after the project.
Best choice: Equipment lease. Lower payments preserve cash, and you can return or upgrade the equipment when the project ends without being stuck with equipment you don't need.
Not Sure Which to Choose?
Use our lease vs buy calculator to compare the total cost of ownership based on your specific situation, tax bracket, and equipment costs.
Compare Lease vs BuyHeavy Equipment Financing Requirements
Understanding what lenders require helps you prepare and increases your chances of approval. Requirements vary by lender, but here's what most will ask for.
Credit Score Requirements
Excellent Credit (720+)
What You Get:
- • Interest rates: 5.99% - 8.99%
- • Down payment: 10-15%
- • Up to 100% financing possible
- • Fast approval (24-48 hours)
Typical Profile:
- • 2+ years in business
- • $500K+ annual revenue
- • Strong cash flow
- • No recent bankruptcies
Good Credit (680-719)
What You Get:
- • Interest rates: 9% - 12%
- • Down payment: 15-20%
- • 80-90% financing typical
- • Approval in 2-4 days
Typical Profile:
- • 2+ years in business
- • $250K+ annual revenue
- • Positive cash flow
- • Some credit issues resolved
Fair Credit (620-679)
What You Get:
- • Interest rates: 12% - 16%
- • Down payment: 20-25%
- • 75-80% financing typical
- • Approval in 3-5 days
Typical Profile:
- • 1+ year in business
- • Revenue requirements flexible
- • May need larger down payment
- • Recent credit issues
Poor Credit (550-619)
What You Get:
- • Interest rates: 16% - 20%+
- • Down payment: 25-30%
- • 70-75% financing typical
- • Need bad credit lender
Typical Profile:
- • Any time in business
- • Higher risk profile
- • Larger down payment required
- • May need co-signer
Don't Meet These Requirements?
Bad credit and startup-friendly lenders exist. They're more flexible on credit scores and time in business, but you'll pay higher rates and need a larger down payment. Keep reading for details on bad credit financing options.
Required Documentation
Business Documents:
- Last 2-3 years of business tax returns
- Current profit & loss statement (YTD)
- Balance sheet
- 3-6 months of business bank statements
- Business license
- Articles of incorporation or LLC formation docs
Personal & Equipment:
- Personal tax returns (2 years)
- Personal financial statement
- Driver's license or government ID
- Equipment quote or invoice
- Equipment specs (make, model, year, serial #)
- Photos & inspection report (for used equipment)
Pro Tip: Prepare Documents in Advance
Having all documentation ready before applying speeds up the process significantly. Create a folder (digital or physical) with all these documents so you can quickly send them to lenders. This can cut your approval time from 5 days to 1-2 days.
How Much Does Heavy Equipment Financing Cost?
The true cost of financing goes beyond the sticker price. You need to understand interest rates, total interest paid, monthly payments, and hidden fees to make an informed decision.
Interest Rate Ranges by Credit Tier
Example Payment Scenarios
Here's what you can expect to pay based on different equipment costs, terms, and interest rates:
$50,000 Equipment | 5 Years | 7% APR
Monthly Payment
$990
Total Interest
$9,400
Total Cost
$59,400
$100,000 Equipment | 7 Years | 9% APR
Monthly Payment
$1,576
Total Interest
$32,384
Total Cost
$132,384
$200,000 Equipment | 10 Years | 6% APR
Monthly Payment
$2,220
Total Interest
$66,400
Total Cost
$266,400
Calculate Your Specific Payment
Use our equipment loan calculator to see your exact monthly payment based on your equipment cost, down payment, interest rate, and term length.
Calculate Your PaymentHidden Fees to Watch For
Origination Fees
Typically 1-3% of loan amount. Some lenders charge this upfront; others roll it into the loan.
Documentation Fees
$200-$500 for processing paperwork and filing UCC liens. Ask if this can be waived.
Prepayment Penalties
1-3% of remaining balance if you pay off early. Not all lenders charge this—ask before signing.
Late Payment Fees
$50-$100 or 5% of payment amount. Set up autopay to avoid these.
Personal Guarantee Fees
Some lenders charge for requiring personal guarantees. This should be free—push back if charged.
How to Calculate If Payments Fit Your Budget
A good rule of thumb: your total monthly debt payments (including the new equipment payment) shouldn't exceed 40% of your monthly revenue. Here's how to check:
- 1.Calculate your average monthly revenue (add up 12 months and divide by 12)
- 2.Multiply by 0.40 to get your maximum safe debt payment amount
- 3.Add up all current monthly loan/lease payments
- 4.Subtract current payments from maximum amount—that's what you can afford for new equipment
Example:
Monthly revenue: $50,000
Maximum debt payments: $50,000 × 0.40 = $20,000
Current debt payments: $12,000
Available for new equipment: $8,000/month
Heavy Equipment Financing with Bad Credit
Bad credit doesn't automatically disqualify you from equipment financing. While traditional banks may turn you down, alternative lenders specialize in bad credit financing. Here's what you need to know.
What "Bad Credit" Means
Bad credit typically results from: late payments, collections, bankruptcies, foreclosures, high debt-to-income ratios, or limited credit history. Lenders view credit below 620 as higher risk.
Alternative Lenders Who Work with Bad Credit
These lender types are more flexible with credit requirements:
Equipment Financing Companies
Companies that specialize only in equipment financing (not general business loans) often work with lower credit scores because the equipment itself is collateral.
Subprime Lenders
Specialized lenders who focus on borrowers with challenged credit. They charge higher rates but are more likely to approve you.
In-House Dealer Financing
Some equipment dealers offer their own financing with more flexible approval criteria. They want to make the sale and may accept lower credit if you put more money down.
What to Expect with Bad Credit
Higher Costs
- • Interest rates: 16-20% or higher
- • Larger down payment: 25-30%
- • Higher origination fees: 3-5%
- • May require personal guarantee
- • Shorter terms: 3-5 years typical
More Requirements
- • Co-signer may be required
- • Additional collateral might be needed
- • More documentation requested
- • Weekly or bi-weekly payment structure
- • GPS tracking on equipment
How to Improve Your Odds
Put More Money Down
A 30% down payment shows commitment and reduces lender risk significantly.
Add a Co-Signer
Someone with good credit (700+) who agrees to guarantee the loan improves approval odds.
Show Strong Business Performance
Strong revenue, positive cash flow, and profitable financials can offset poor credit.
Explain Credit Issues
Write a letter explaining what caused credit problems and what you've done to fix them.
Choose Newer Equipment
Lenders are more comfortable financing newer equipment (less than 5 years old) with bad credit borrowers.
Apply to Multiple Lenders
Different lenders have different risk tolerances. Apply to 5-7 lenders to find one willing to work with you.
Real Talk: When You Should Wait
Sometimes waiting and improving your credit is smarter than accepting 20%+ interest rates. Consider waiting if:
- • You can raise your credit 50+ points in 6 months
- • The equipment isn't urgently needed
- • High payments would strain cash flow too much
- • You're close to paying off other debts that hurt your debt-to-income ratio
Six months of credit improvement could save you tens of thousands in interest over the loan term.
New vs Used Heavy Equipment Financing
Financing used equipment can save you money upfront, but there are important differences in rates, terms, and requirements. Here's what you need to know.
New Equipment Financing
Advantages:
- • Lower interest rates (1-3% less)
- • Longer terms available (up to 10 years)
- • 100% financing possible
- • Easier approval process
- • Manufacturer warranty included
- • Latest technology and features
Disadvantages:
- • Higher purchase price
- • Immediate depreciation hit
- • Higher insurance costs
Used Equipment Financing
Advantages:
- • Lower purchase price (30-50% less)
- • Less depreciation hit
- • Lower monthly payments
- • Proven reliability record
- • More negotiating power
Disadvantages:
- • Higher interest rates (1-3% more)
- • Shorter terms (typically 5-7 years max)
- • Larger down payment required (20-25%)
- • More documentation needed
- • Limited or no warranty
- • May need inspection
Financing Differences by Equipment Age
Treated almost like new equipment. Low rates (6-10%), long terms (7-10 years), minimal down payment (10-15%). Easy approval.
Still considered low risk. Moderate rates (8-12%), terms up to 7 years, 15-20% down payment. Inspection may be required.
Higher rates (10-15%), shorter terms (5 years max), 20-25% down. Inspection required. Need maintenance records.
Many lenders won't finance. Those that do charge 15-20% rates, require 30% down, max 3-year terms. Extensive inspection required.
When Used Equipment Makes Sense
Consider used heavy equipment if:
- You need equipment for a specific project (not long-term)
- Your budget is tight and you can save 30-50%
- The equipment type has a proven track record for longevity
- You can verify maintenance records and inspection results
- Technology hasn't changed significantly (simple mechanical equipment)
Depreciation Considerations
New heavy equipment typically depreciates 20-30% in the first year. By purchasing 2-3 year old equipment, you avoid this steepest depreciation while still getting relatively modern equipment with most of its useful life ahead.
Example: A $200,000 new excavator might be worth $140,000 after 2 years (30% depreciation). If you buy it used for $140,000, you save $60,000 upfront and the depreciation curve is much flatter going forward.
Where to Get Heavy Equipment Financing
Not all lenders are created equal. Each type has strengths and weaknesses. Understanding your options helps you find the best fit for your situation.
Banks and Credit Unions
Pros:
- • Lowest interest rates (5.99-9%)
- • Relationship-based lending
- • May offer business banking services
- • Local decision-making (credit unions)
Cons:
- • Strict credit requirements (700+)
- • Slow approval process (5-7 days)
- • Lots of documentation required
- • May require existing relationship
Best for: Established businesses with excellent credit, existing banking relationships, and patience for the process.
Equipment Financing Companies
Pros:
- • Specialize in equipment (they understand it)
- • Faster approval (1-3 days)
- • More flexible credit (down to 600)
- • Streamlined application process
- • Industry expertise
Cons:
- • Slightly higher rates than banks
- • May charge origination fees
- • Some have prepayment penalties
Best for: Most businesses. Good balance of competitive rates, fast approval, and flexible requirements.
Manufacturer/Dealer Financing
Pros:
- • One-stop shopping (equipment + financing)
- • Promotional rates (0% for 12 months, etc.)
- • More flexible on credit
- • Quick decision (same-day possible)
- • Dealer wants to make the sale
Cons:
- • May not be the best rate
- • Promo rates have strict terms
- • Limited to that brand only
- • May pressure you into financing
Best for: New equipment purchases, taking advantage of manufacturer promotions, or when speed is essential.
Online Lenders
Pros:
- • Fastest approval (24-48 hours)
- • Fully online application
- • Minimal documentation
- • Flexible credit requirements
- • Transparent pricing
Cons:
- • Higher rates than traditional banks
- • May have loan size limits
- • No in-person relationship
- • Variable quality between platforms
Best for: Businesses needing fast approval, those comfortable with online processes, or borrowers with imperfect credit.
SBA Loans (for Heavy Equipment)
Pros:
- • Lower interest rates
- • Longer terms (up to 25 years)
- • Lower down payments (10%)
- • Government-backed (easier approval)
Cons:
- • Very slow approval (30-90 days)
- • Extensive paperwork
- • Personal guarantee required
- • Equipment must be for U.S. operations
- • Business must meet SBA size standards
Best for: Large equipment purchases ($250K+), businesses willing to wait for approval, or those who can't qualify elsewhere.
How to Compare Lenders
Don't just look at the interest rate. Here's what to compare:
Total Cost of Financing
Calculate total interest paid over the life of the loan. A slightly lower rate over a longer term might actually cost more.
All Fees
Origination, documentation, application, and any other upfront or monthly fees. These add up.
Prepayment Terms
Can you pay off early without penalty? Some lenders charge 1-3% of remaining balance.
Customer Reviews
Check Google, BBB, and Trustpilot. Look for patterns in complaints about hidden fees or poor service.
Approval Speed
How quickly do you need the equipment? Fast approval may be worth a slightly higher rate.
Get 3-5 Quotes Before Deciding
Interest rates can vary by 2-5% between lenders for the same borrower. On a $100,000 loan, a 2% difference equals $10,000+ over the life of the loan. Take the time to shop around—it literally pays.
Heavy Equipment Tax Benefits and Section 179
One of the biggest advantages of financing equipment is the tax benefits. Understanding Section 179, bonus depreciation, and regular depreciation can save you tens of thousands in taxes.
Section 179 Deduction
Section 179: Deduct the Full Purchase Price in Year One
Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service, rather than depreciating it over several years.
2026 Limits:
- • Maximum deduction: $1,220,000
- • Phase-out threshold: $3,050,000
- • Must be used 50%+ for business
- • Must be placed in service by Dec 31
What Qualifies:
- • New and used equipment
- • Excavators, bulldozers, loaders
- • Dump trucks, skid steers
- • Cranes, forklifts, compactors
- • Financed or purchased outright
Example: You buy a $200,000 excavator in 2026. With Section 179, you can deduct the full $200,000 from your taxable income this year.
Tax Savings: If you're in the 24% tax bracket, that's $48,000 in tax savings in year one. For the 32% bracket, that's $64,000 saved.
Bonus Depreciation
Additional First-Year Write-Off
If your equipment purchase exceeds the Section 179 limit, you can use bonus depreciation to write off additional amounts.
2026 Bonus Depreciation:
40% of remaining cost after Section 179
Note: Bonus depreciation is phasing down by 20% per year. It was 80% in 2023, 60% in 2024-2025, 40% in 2026, and will be 20% in 2027.
Combined Example:
Equipment cost: $1,500,000
Section 179 deduction: $1,220,000
Remaining amount: $280,000
Bonus depreciation (40%): $112,000
Total first-year deduction: $1,332,000
Regular Depreciation (MACRS)
When Section 179 Doesn't Make Sense
If you don't have enough taxable income to benefit from Section 179 (you can't create a loss), you can use Modified Accelerated Cost Recovery System (MACRS) depreciation instead.
Heavy Equipment MACRS:
Most heavy construction equipment uses 5-year or 7-year depreciation schedules.
- • Year 1: 20% of cost
- • Year 2: 32% of cost
- • Year 3: 19.2% of cost
- • Year 4: 11.52% of cost
- • Year 5: 11.52% of cost
- • Year 6: 5.76% of cost
MACRS spreads the deduction over multiple years, which can be beneficial if you have limited taxable income this year or want to smooth out deductions.
Lease vs Buy: Tax Implications
If You Buy (Loan)
- Deduct full purchase price with Section 179
- Deduct loan interest as business expense
- Build depreciation for future years
- Best for maximizing year-one deductions
If You Lease
- Deduct full lease payment each month
- Simpler accounting (operating expense)
- No depreciation tracking needed
- Best for consistent annual deductions
Important Disclaimer
Tax laws are complex and change frequently. The information here is general guidance, not tax advice. Always consult with a qualified CPA or tax advisor before making equipment financing decisions based on tax benefits. They can calculate your specific tax situation and maximize your deductions.
Calculate Your Section 179 Deduction
Use our Section 179 calculator to estimate your tax savings based on your equipment cost and tax bracket.
Section 179 CalculatorCommon Heavy Equipment Financing Mistakes to Avoid
Learn from others' mistakes. Here are the most common errors business owners make when financing heavy equipment—and how to avoid them.
Mistake #1: Not Shopping Around for Rates
Many businesses take the first offer they receive, whether from their bank or the equipment dealer. This can cost you thousands.
How to avoid:
Get at least 3-5 quotes from different lender types (bank, equipment financing company, online lender). Even a 1% rate difference on a $100,000 loan saves $5,000+ over 7 years.
Mistake #2: Focusing Only on Monthly Payment
Lenders can make any payment look affordable by extending the term. A low monthly payment might mean you're paying far more in total interest.
How to avoid:
Always calculate and compare the total cost of financing (principal + all interest + fees). Sometimes a higher monthly payment with a shorter term costs less overall.
Mistake #3: Skipping the Equipment Inspection (Used Equipment)
Buying used equipment without a professional inspection can lead to costly repairs that exceed what you -saved- buying used.
How to avoid:
Always pay for a professional inspection ($500-$1,500) on used equipment. Check hour meter readings, maintenance records, hydraulics, engine, and undercarriage. It's cheap insurance against a lemon.
Mistake #4: Not Reading the Fine Print
Buried in the contract may be prepayment penalties, balloon payments, hidden fees, or unfavorable terms that cost you later.
How to avoid:
Read the entire financing agreement before signing. Ask questions about anything unclear. Specifically look for: prepayment penalties, balloon payments, late fees, personal guarantee requirements, and what happens if you default.
Mistake #5: Overleveraging Your Business
Taking on too much debt relative to your revenue can strain cash flow and put your business at risk if revenue dips.
How to avoid:
Follow the 40% rule: total monthly debt payments shouldn't exceed 40% of monthly revenue. Leave room for slow months and unexpected expenses. If payments would exceed this, put more down or choose less expensive equipment.
Mistake #6: Choosing Wrong Loan Structure
Choosing a lease when you need long-term equipment (or a loan when you need short-term flexibility) can cost you money and create problems.
How to avoid:
Match the financing structure to your actual needs. If you'll use equipment 10+ years and want tax benefits, choose a loan. If you need flexibility or plan to upgrade in 3-5 years, choose a lease. Don't let the dealer pressure you into the wrong option.
Mistake #7: Ignoring Total Cost of Ownership
The equipment payment is only part of the cost. Insurance, maintenance, repairs, fuel, and storage add up and can strain your budget.
How to avoid:
Budget for all ownership costs: monthly payment + insurance ($200-$500/month) + maintenance ($500-$2,000/month) + fuel + repairs. Make sure you can truly afford the total, not just the payment.
Ready to Finance Your Heavy Equipment?
Get free quotes from multiple lenders and compare your options
Frequently Asked Questions
Can I finance used heavy equipment?
Yes, you can finance used heavy equipment. Most lenders will finance equipment up to 10-15 years old. Used equipment typically requires a larger down payment (15-25%) and may have slightly higher interest rates (1-3% more than new equipment). The equipment must pass inspection and have verifiable maintenance records.
What credit score do I need for heavy equipment financing?
Most lenders require a minimum credit score of 600-650 for heavy equipment financing. With excellent credit (720+), you can get rates as low as 5.99-8.99%. Good credit (680-719) qualifies for 9-12% rates. Fair credit (620-679) can still qualify but expect 12-16% rates and higher down payments. Bad credit lenders exist but charge 16-20% or more.
How long does approval take?
Equipment financing approval typically takes 1-5 business days. Online lenders and equipment financing companies are fastest (24-48 hours). Traditional banks may take 5-7 days. The process is faster if you have all documentation ready: financial statements, tax returns, equipment quote, and business information.
Can I pay off the loan early?
Most equipment loans allow early payoff, but check for prepayment penalties. Some lenders charge 1-3% of the remaining balance if you pay off early in the first 1-2 years. Equipment leases may have early termination fees. Always review the contract and ask about prepayment terms before signing.
What if my application is denied?
If denied, ask the lender for specific reasons. Common issues include low credit score, insufficient time in business, weak financials, or high debt-to-income ratio. You can improve your chances by:
- • Increasing your down payment to 25-30%
- • Adding a co-signer with good credit
- • Improving your credit score before reapplying
- • Waiting until your business has stronger financials
- • Applying to bad credit or startup-friendly lenders
Do I need a down payment?
Down payment requirements vary by lender and your credit profile. Expect 10-20% down for excellent credit, 15-25% for good credit, and 20-30% for fair or bad credit. Some lenders offer 100% financing for strong borrowers, while others require 25-30% down for used equipment or riskier profiles. Larger down payments can help you secure better rates.
How do seasonal businesses qualify?
Seasonal businesses can qualify for heavy equipment financing by showing strong seasonal revenue, multiple years of tax returns proving consistent seasonal patterns, and adequate cash reserves. Some lenders offer seasonal payment structures that match your revenue cycle. Expect to provide 2-3 years of financials and may need a larger down payment (20-30%).
What documents do I need?
Required documents typically include:
- • 2-3 years of business tax returns
- • Year-to-date profit & loss statement
- • Current balance sheet
- • 3-6 months of bank statements
- • Equipment quote or invoice
- • Business license
- • Formation documents (LLC, Corp, etc.)
- • Personal tax returns (2 years)
- • Personal financial statement
- • Government-issued ID
Have these ready before applying to speed up approval.
Is a personal guarantee required?
Most equipment financing requires a personal guarantee from business owners with 20%+ ownership. This means you're personally liable if the business defaults. While uncomfortable, it's standard practice and allows for better rates since the equipment is collateral. Established businesses with strong credit may avoid personal guarantees, but it's rare.
Can I finance attachments and accessories?
Yes, most lenders will finance attachments, accessories, and add-ons as part of the equipment package. This includes buckets, blades, rippers, grapples, and other specialized attachments. Some lenders require attachments to be purchased at the same time as the primary equipment, while others allow you to finance attachments separately later.
Next Steps: Getting Your Heavy Equipment Financed
You now understand how heavy equipment financing works, what lenders look for, and how to find the best deal. Here's your action plan to get started:
Your 5-Step Action Plan
Identify Your Equipment Needs
Know exactly what equipment you need, including make, model, year, and whether new or used. Get quotes from dealers.
Gather Your Documentation
Collect tax returns, financial statements, bank statements, and business documents. Having these ready speeds up approval.
Calculate Your Budget
Use our equipment loan calculator to determine what monthly payment you can afford. Follow the 40% rule (debt payments ≤ 40% of revenue).
Apply to 3-5 Lenders
Don't settle for the first offer. Shop around with banks, equipment financing companies, and online lenders to compare rates and terms.
Review & Close
Compare offers based on total cost, not just monthly payment. Read the fine print, ask questions, and choose the best option for your business.
Calculate Your Payment
Use our free equipment loan calculator to estimate your monthly payments and see how different down payments and terms affect your total cost.
Try CalculatorCompare Lease vs Buy
Still deciding between leasing and buying? Use our comparison calculator to see which option makes more financial sense for your situation.
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Related Resources
Equipment Loan Calculator
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Try CalculatorConstruction Calculator
Specialized calculator for construction equipment with industry-specific features and estimates.
View CalculatorSection 179 Calculator
Calculate your potential tax savings with Section 179 deductions for equipment purchases.
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