Eligibility for Heavy Equipment Funding
Because the equipment is considered collateral, approval odds for heavy equipment financing tend to be higher, on average, than that of other funding types.
Below are the main factors we look at:
- Heavy equipment value
- Average monthly revenue
- Time in business
- Credit rating
Don’t count yourself out if your credit standing is less than stellar. Credit scores are just one part of the equation. They’re not as big of a factor for equipment financing as they are with other types of loans.
How Does Heavy Equipment Financing Work?
The two main ways to fund heavy equipment are to purchase the equipment using financing or to lease the equipment, which involves an extended rental agreement.
Most individuals who choose to purchase the heavy machinery do so by taking out a loan. The lender provides the capital needed in order to buy the heavy machinery. You can finance up to 100% of the cost of the equipment.
The loan borrower makes monthly payments towards their heavy equipment loan until it is paid back. Once the loan is fully paid back, the borrower has complete ownership of the heavy machinery and no longer needs to make payments.
The primary benefit to using a heavy equipment loan to finance is that the borrower is investing in the heavy machinery itself, which is a business asset. After they pay back the loan, they can continue to use the equipment and can pocket any extra cash that would have been used towards payments.
When you lease, you pay to rent the equipment over a predetermined period of time for a fixed, monthly cost. Similar to heavy equipment loans, there is no collateral required for heavy equipment leasing. When the leasing period ends, the lessee can choose to continue to rent the equipment, to purchase the equipment for the remaining value, or to return the equipment.
Individuals might choose to lease heavy equipment if they only need the equipment for a short duration. That way, they do not have to continue to make payments on machinery they are no longer using or in need of.
It can also be advantageous to lease heavy equipment if you expect you will need updated, newer models in the near future. Doing so can save you from continuously purchasing new and upgraded heavy machinery, which can become costly over time.
Frequently Asked Questions about Heavy Equipment Loans
Heavy equipment financing describes a loan or lease used to obtain different types of heavy machinery. Heavy equipment is commonly associated with construction work because construction jobs typically require use of heavy machinery.
The loan or lease is used in order to access and utilize heavy machinery needed to conduct business. Dump trucks and bulldozers, for example, are expensive and heavy pieces of equipment that many choose to finance. By securing financing for heavy machinery, business owners can perform necessary company operations and help their business grow.
There are different financing options available. Each option has unique advantages and disadvantages. Talk to a lender at Clarify to determine which financing option is right for you.
Heavy equipment financing is used to describe a more specific category of equipment than equipment financing. Heavy equipment financing is funding for heavy machinery, in particular. Heavy machinery is commonly used for purposes of construction and building maintenance, for example.
Equipment financing is funding for all types of business equipment. This might include computers for an office building, or a commercial oven for a restaurant, for example. It is used to describe a broader range of equipment than heavy equipment financing.
