Heavy equipment and construction financing helps businesses in the construction and related industries. These companies need expensive machinery, like Bobcats, excavators, and other heavy-duty equipment, to perform daily operations effectively. However, buying this equipment outright can drain their finances – especially for small and medium-sized businesses. Rather than going without, equipment financing provides a solution as it allows companies to acquire essential machinery without a massive upfront cost. This will enable them to preserve cash flow for other needs.
This article explores various financing options available for heavy equipment, helping you find the appropriate financing fit for your business, regardless of your credit situation.
Pros and cons of heavy equipment & construction financing
As with any type of loan (including business loans), there are both advantages and disadvantages of heavy equipment financing.
Pros of heavy equipment & construction financing:
- Preserves cash flow by allowing payment for equipment over time instead of making a large upfront purchase. This lets businesses make manageable monthly payments, keeping their working capital intact for other operational expenses.
- Ensures the flexibility to upgrade equipment when newer models become available meaning your business has access to the “latest and greatest” technology. This can allow you to stay competitive without significant financial strain.
- Provides the potential for tax benefits as interest payments or leasing costs may be tax-deductible. This offers further financial relief.
Cons of heavy equipment & construction financing:
- Interest and fees increase the overall cost of the equipment. This means that final expenses are higher under financing terms than purchasing outright.
- If your credit score is low, you may face elevated interest rates, potentially straining your finances. Some lenders may also require a down payment, resulting in a substantial upfront cost.
Before proceeding with any type of financing, we encourage you to thoroughly evaluate the pros and cons – Is financing right for you and your business?
Options for heavy equipment & construction loans
- The “Big 5” Canadian Banks
The major Canadian banks (TD, RBC, CIBC, Scotiabank and BMO) all provide financing for heavy equipment and construction. These banks offer competitive interest rates, extended loan terms, and access to larger loan amounts. If you have good credit, these banks are often the top choice as they offer both reliable and favorable terms.
Swoop Funding offers flexible heavy equipment financing solutions for businesses of varying sizes. They have a streamlined application process, making approval easy. Swoop is known for its fee transparency and flexible repayment options, ideal for businesses seeking quick and straightforward funding solutions.
Merchant Growth provides financing options for companies with less-than-perfect credit. They offer flexible terms that cater to businesses that may or may not qualify for traditional bank loans. Their unique services and tailored approach make them a top choice among small business owners looking to finance essential equipment.
See our review of Merchant Growth here.
Driven.ca focuses on fast and flexible financing options, including equipment leasing. They work with businesses of all sizes, providing quick approvals and customizable financing solutions. Driven.ca emphasizes speed, making them a great choice for companies needing immediate access to heavy equipment or construction funds.
See our review of Driven.ca here.
SharpShooter Funding offers specialized financing for small and medium-sized businesses. They focus on providing fast funding with a straightforward application process and flexible repayment terms. They are a viable option for companies that need quick financial assistance to acquire machinery or fund construction projects.
Journey Capital provides equipment loans for those with poor or no credit. They offer tailored financing solutions that cater to the unique needs of businesses facing credit challenges. Journey Capital helps companies access the necessary equipment without making credit issues a barrier.
See our review of Journey Capital here.
Comparing good vs. bad credit for heavy equipment loans
How does finding financing change if you have bad credit or even no credit? Lenders view borrowers with poor credit as riskier – often they extend stricter terms and higher interest rates as a result. Those with higher credit have more options as well as better interest rates and more favorable terms. Below is a comparison of how financing differs based on credit standing.
| Feature | Good credit financing | Bad/No credit financing |
| Likelihood of approval | Higher | Lower but dependent on the lender |
| Interest rates | Lower (5-15%) | Higher (15-30%+) |
| Loan approval time | Moderate (1-2 weeks) | Fast (1-3 days) |
| Down payment requirements | Low or none | High (10-30%) |
| Loan terms | Longer (up to 20 years) | Shorter (up to 5 years) |
| Speed of funding | Possibility for fast funding (though speed comes at a cost) | Moderate to fast |
| Access to traditional lenders | Yes | Limited |
| Types of loans available | Variety (including term loans, business loans, lines of credit, SBA, etc) | Limited (microloans, secured loans, merchant cash advances) |
What to consider when choosing a lender
When selecting a lender for heavy equipment financing, evaluate several factors including the terms of your loan and the fees involved. Take into consideration:
- Interest rates as they directly impact the overall cost of the loan. Evaluate them carefully!
- Ensure the repayment terms fit within your business’ budget.
- Note any additional fees. Some lenders have application charges, processing fees and may even have early repayment penalties. These can add up over time.
- Eligibility requirements are a key consideration. Some lenders have strict credit score requirements, while others are more flexible.
- What type of equipment do you need? How soon do you need it? The urgency of acquiring equipment may influence whether you choose a traditional bank loan or an alternative lender with quicker processing times.
Steps to improve your chances for loan approval
To increase your chances of getting approved for any type of financing, including heavy equipment and construction loans, begin by improving your credit score. Lenders look at BOTH personal and business credit scores to assess your reliability as a borrower. Ensuring timely payments on existing loans and reducing outstanding debt can help to boost your creditworthiness. You can also consider consolidating your debts.
Maintaining sound business finances is also important. Lenders review your business’s financial statements to gauge profitability and stability. Keeping accounts in good shape and demonstrating consistent revenue increases your chances of approval.
Also, as you complete your application, include a detailed business plan. Be sure your plan outlines how the equipment will benefit your operations. How will it contribute to revenue growth? Including this information and documentation, such as tax returns, bank statements, and equipment quotes, creates a positive impression during the application process.
The bottom line
Finding the right lender for heavy equipment financing or construction loans ensures your business can operate efficiently and grow. Regardless of your business’ credit score, financing options are available to suit your company’s needs. From major banks to alternative lenders like Swoop Funding and Merchant Growth, each option has potential benefits.
Identify your specific needs first as lenders vary based on the types of loans they provide. Are you in search of startup funding or equipment financing? Or do you need a working capital loan? What about a line of credit or a merchant cash advance (MCA)? Clarifying your exact needs will help you find the right lender. It’s also wise to explore local lenders in your city or province. For example, Alberta, BC, Ontario, and Quebec each offer unique government programs. And a local lender can tailor their service to your region, offering advice on unique government programs, grants, and loans.
Regardless of your location, you have options – yes, even if your credit situation isn’t ideal. Simply reach out to the lenders discussed in this article for personalized guidance. Even if your credit situation isn’t ideal, there are options that can help your business acquire the equipment it needs to stay sharp in a competitive industry.
Lauren has over 13 years of experience in wealth management and financial planning. She is a CFA charterholder and holds a Bachelor's degree in Finance. Lauren has worked with several asset management firms, offering wealth advisory and portfolio management services to high-net-worth clients.
