3 Things To Know About Heavy Equipment Loans

If you run a construction business and you want to invest in a piece of heavy equipment, such as an excavator, you may need to take out a heavy equipment loan to help you finance the purchase of the equipment you need to keep your business running.

1. Heavy Equipment Financing Is Different Than Equipment Financing

A heavy equipment financing loan is different than an equipment financing loan. An equipment financing loan is designed to cover more ordinary business equipment needs, such as printers, file cabinets, and computers. Heavy equipment financing is different because you are purchasing very expensive equipment. You have to have special training and/or a special license to operate heavy equipment. This is a special type of vehicle loan that is different from a typical equipment loan.

2. Two Different Types of Heavy Equipment Loans

There are two different types of heavy equipment financing options.

First, there is a heavy equipment lease. With a lease, you don't have to make a down payment, nor do you have to have any collateral. You are basically renting the equipment and making monthly rental payments for a set period of time. At the end of the agreement, you can return the equipment, start the lease again, or work on a purchasing agreement for the equipment.

Second, there is a heavy equipment loan. With a heavy equipment loan, if you have stellar credit, you may not have to make a down payment at all, although it is best not to count on that. With a loan, you will pay off the dealership for the construction equipment and own it outright. The equipment will serve as collateral for your loan, so if you don't pay off the loan, the bank can take the equipment back to satisfy your debt.

3. Easy to Qualify for a Heavy Equipment Loan

A heavy equipment loan is more accessible to qualify for than other types of business loans. With a heavy equipment loan, the equipment you are purchasing, like an excavator, will serve as the loan's collateral. If you have a decent credit rating for your business or can show that you have a steady cash flow, you should get a loan with no down payment and fair interest rates. If your cash flow isn't that great yet, or your credit score is just okay, you may have to make a down payment, but you should still qualify for the loan.

When you have a big piece of equipment you want to purchase, you need to get a heavy equipment loan. A heavy equipment loan will use the equipment as the collateral for the loan, making it a more accessible type of business loan. Contact a provider of excavation equipment financing to learn more.