If you own a construction business and need to purchase equipment, financing can help you acquire the machinery you need without paying the entire purchase price upfront.
Whether you are purchasing an excavator, bulldozer, skid steer, loader, dump truck, or another piece of heavy equipment, there are financing programs available for many different types of borrowers.
Some business owners have excellent credit and strong financials.
Others have been in business for years and generate good revenue, but their personal credit is less than perfect.
Some are just getting started and need their first piece of equipment.
The important thing to understand is that construction equipment financing is not a one-size-fits-all process.
Different lenders have different requirements, and the same transaction that gets declined by one lender may be approved by another.
At TheBroker.Finance, I work with multiple equipment financing lenders, and my goal is to look at the entire transaction to determine which financing options may make the most sense.
This guide explains how construction equipment financing works, what lenders look at, and what you should know before applying.
What Is Construction Equipment Financing?
Construction equipment financing allows a business to purchase equipment and pay for it over time rather than paying the full purchase price upfront.
For example, let’s say your construction company needs a $150,000 excavator.
Instead of using $150,000 of your company’s cash, you may be able to finance the purchase and make payments over an agreed-upon term.
Depending on the lender and financing program, the equipment itself generally serves as collateral for the financing.
This can make equipment financing different from an unsecured business loan.
However, that does not mean approval is based only on the equipment.
The lender will typically evaluate the borrower, the business, the equipment, and the overall transaction.
Some lenders are more concerned with credit.
Others may place more emphasis on business revenue, time in business, down payment, or the resale value of the equipment.
That is why finding the right lender can be just as important as finding the right piece of equipment.
What Types of Construction Equipment Can Be Financed?
Many types of new and used construction equipment may qualify for financing.
Some of the more common examples include:
- Excavators
- Bulldozers
- Skid steers
- Compact track loaders
- Wheel loaders
- Backhoes
- Motor graders
- Cranes
- Dump trucks
- Concrete mixers
- Concrete pumps
- Asphalt pavers
- Rollers and compactors
- Trenchers
- Telehandlers
- Forklifts
- Other heavy construction equipment
Not every lender finances every type of equipment.
Some lenders specialize in yellow iron, which generally refers to heavy construction machinery such as excavators, bulldozers, and loaders.
Other lenders may be more comfortable financing commercial trucks, trailers, or specialized equipment.
Some equipment is easier to finance because it has a well-established resale market.
For example, a popular excavator from a major manufacturer may be more attractive to a lender than a highly specialized piece of equipment with limited resale demand.
That does not mean specialized equipment cannot be financed.
It means the lender may evaluate the transaction differently.
How Does Construction Equipment Financing Work?
The process usually starts with identifying the equipment you want to purchase.
The lender will want to know what you are buying, how much it costs, and who is selling it.
From there, the financing process generally involves reviewing the borrower and the business.
Depending on the lender, you may need to provide:
- A completed credit application
- Equipment description
- Purchase price or invoice
- Business information
- Personal credit information
- Business bank statements
- Financial statements
- Tax returns
- Down payment information
Not every transaction requires all of these documents.
Some stronger borrowers may qualify for application-only equipment financing programs that require less financial documentation.
Other transactions, particularly those involving challenged credit, larger equipment purchases, or newer businesses, may require more detailed underwriting.
Once the lender approves the transaction and all conditions are satisfied, the equipment purchase can be funded.
The business then makes payments according to the financing agreement.
What Do Lenders Look At When Financing Construction Equipment?
There are several factors lenders commonly evaluate.
One of the biggest mistakes business owners make is assuming that financing approval is determined entirely by their credit score.
Credit is important, but it is not the only consideration.
Lenders may look at:
- Personal credit
- Business credit
- Time in business
- Monthly business revenue
- Business cash flow
- Bank account activity
- Existing business debt
- Equipment age and condition
- Equipment purchase price
- Equipment resale value
- Down payment
- Industry experience
- Additional collateral
- Overall financial strength
Different lenders place different amounts of importance on these factors.
For example, one lender may decline a borrower because of a 580 credit score.
Another lender may be willing to consider the same borrower because the business has been operating for ten years, generates strong revenue, and has money available for a down payment.
The credit score has not changed.
The lender’s approach to the transaction has.
That is one of the biggest advantages of working with a broker who has access to multiple financing sources.
What Credit Score Is Needed for Construction Equipment Financing?
There is no single minimum credit score that applies to every construction equipment lender.
Some lenders prefer borrowers with good to excellent credit.
Other lenders have programs designed for borrowers with less-than-perfect credit.
I work with equipment financing programs that may consider borrowers with credit scores in the 500s and, depending on the overall transaction, sometimes even lower.
However, lower credit usually means the lender will want to see strengths somewhere else in the deal.
Those strengths might include:
- Strong monthly business revenue
- Several years in business
- A substantial down payment
- Equipment with good resale value
- Additional collateral
- Strong business cash flow
For example, a business owner with a 550 credit score, eight years in business, and $150,000 in monthly revenue is very different from a borrower with the same credit score who started a business three months ago and has little revenue.
Both borrowers have the same credit score.
But they do not represent the same level of risk.
This is why I prefer to understand the entire transaction before deciding which financing options may be realistic.
Construction Equipment Financing With Bad Credit
Bad credit does not automatically mean you cannot finance construction equipment.
However, it can make the transaction more challenging.
Traditional lenders may have stricter credit requirements, while some alternative equipment financing lenders may be more flexible.
For borrowers with challenged credit, the lender may focus more heavily on the business and the equipment itself.
For example, an established excavation company with consistent revenue may have financing options even if the owner’s personal credit has been damaged.
A larger down payment may also improve the transaction.
In some situations, additional collateral can help strengthen an application.
However, there are limits.
A borrower with severely damaged credit, little revenue, no down payment, and limited business history may have a difficult time obtaining financing.
The goal is not to promise approval regardless of circumstances.
It is to determine whether the strengths of the transaction are enough to offset the weaknesses.
If credit is one of your biggest concerns, you can also read my Bad Credit Equipment Financing Guide for a more detailed explanation of how lenders evaluate these transactions.
How Much Down Payment Is Required?
There is no universal down payment requirement for construction equipment financing.
Some well-qualified borrowers may be eligible for financing with little or no money down.
Other borrowers may need 10%, 20%, 30%, or more.
The amount depends on the lender and the transaction.
For example, a borrower with excellent credit, a well-established business, and strong financials may qualify for a program that requires very little upfront investment.
A borrower with weaker credit may need a larger down payment to make the transaction acceptable to the lender.
The equipment itself can also affect the requirement.
A lender may be more comfortable financing a newer, widely used excavator than an older piece of equipment with limited resale value.
A larger down payment reduces the amount the lender is financing relative to the equipment’s value.
That can help reduce the lender’s risk.
However, a larger down payment does not guarantee approval.
The business still needs to demonstrate that it can reasonably support the financing payments.
Can You Finance Used Construction Equipment?
Yes.
Many equipment financing lenders will finance used construction equipment.
In fact, purchasing used equipment can sometimes make more financial sense than purchasing new equipment.
A business may be able to acquire the machinery it needs at a significantly lower price.
However, used equipment financing comes with additional considerations.
The lender may review:
- Year of manufacture
- Equipment condition
- Operating hours
- Purchase price
- Current market value
- Manufacturer and model
- Maintenance history
- Seller information
Equipment age is particularly important.
Some lenders have strict age limits.
Others are willing to finance older equipment if the overall transaction makes sense.
Operating hours may also matter.
For example, two excavators manufactured in the same year may have very different values depending on their operating hours, maintenance history, and condition.
The lender wants to know that the equipment has sufficient value to support the financing.
This is especially important if the borrower has challenged credit.
Can You Finance Construction Equipment From a Private Seller?
Yes, some lenders allow private-party construction equipment purchases.
You do not always have to purchase from a dealership.
For example, you may find a used bulldozer being sold directly by another contractor.
If the equipment is in good condition and the purchase price makes sense, there may be financing options available.
However, private-party purchases can involve more documentation.
The lender may require:
- Bill of sale
- Seller identification
- Proof of ownership
- Equipment serial number
- Photos of the equipment
- Equipment condition information
- Verification of existing liens
- Independent equipment valuation
The lender wants to confirm that the seller has the legal right to sell the equipment and that there are no unresolved ownership or lien issues.
Some lenders do not allow private-party transactions at all.
Others specialize in them.
That is why it helps to determine which lenders may be suitable before submitting an application.
Construction Equipment Financing for Startups
Startup construction businesses may also qualify for equipment financing.
However, the requirements are often different from those available to established companies.
One of the biggest challenges with startup financing is the lack of operating history.
An established construction company may have several years of revenue and financial statements.
A startup may not have any of that information.
As a result, the lender may place more emphasis on the owner’s qualifications.
That can include:
- Personal credit
- Previous construction industry experience
- Available cash reserves
- Down payment
- Type of equipment
- Equipment value
- Business plan
- Existing contracts or anticipated revenue
For example, someone who has worked in excavation for fifteen years and is starting their own company may have a stronger application than someone entering the industry with no prior experience.
Strong credit and an available down payment can also help.
That does not mean every startup will qualify.
But it does mean that being a new business does not automatically eliminate every financing option.
Equipment Leasing vs. Equipment Financing
The terms equipment leasing and equipment financing are often used interchangeably.
However, they are not always the same thing.
With a traditional equipment loan, the business generally purchases the equipment using borrowed funds and repays the lender over time.
The equipment commonly serves as collateral for the loan.
Equipment leasing can work differently.
Some leases are structured so the business can purchase the equipment at the end of the agreement.
Others may include different end-of-term purchase options or return requirements.
For construction companies planning to use equipment for many years, financing or a lease-to-own structure may make sense.
For businesses that regularly upgrade equipment, a different lease arrangement may be worth considering.
The important thing is to understand the agreement before signing.
Pay attention to the payment amount, total financing cost, ownership provisions, end-of-term requirements, and any additional fees.
The lowest monthly payment is not always the least expensive option.
How Long Are Construction Equipment Financing Terms?
Financing terms depend on the lender, the equipment, and the borrower.
Some programs offer shorter repayment periods.
Others may offer terms extending five or six years, or longer in certain situations.
The age and expected useful life of the equipment can affect the term.
For example, a lender may be comfortable offering a longer financing term on a new piece of heavy equipment than on an older machine approaching the end of its useful life.
Credit quality and overall business strength may also affect the options available.
A longer term can reduce the monthly payment, but it may increase the total amount paid over the life of the financing.
A shorter term usually results in higher payments but may reduce total financing costs.
The right structure depends on the business’s cash flow and financial goals.
How Much Does Construction Equipment Financing Cost?
Construction equipment financing rates are not the same for every borrower.
The cost of financing can depend on:
- Credit profile
- Time in business
- Monthly revenue
- Equipment age
- Equipment type
- Purchase price
- Down payment
- Financing term
- Lender requirements
A borrower with excellent credit and strong business financials will generally have access to more competitive financing options than a borrower with severely damaged credit.
However, it is important to evaluate more than just the advertised rate.
You should also understand the total repayment amount, fees, down payment, payment schedule, and any end-of-term obligations.
Some financing agreements use an interest rate, while others may quote a lease payment or financing factor.
These are not necessarily directly comparable.
Make sure you understand the actual cost before making a decision.
Can You Finance Construction Equipment if You Already Have Other Equipment Loans?
Possibly.
Many established construction businesses have multiple pieces of financed equipment.
Having existing equipment loans does not automatically prevent you from obtaining additional financing.
However, the lender will want to know whether the business can comfortably support another payment.
For example, a construction company may already have monthly payments on an excavator, skid steer, and dump truck.
The company now wants to purchase another machine to take on additional projects.
The lender may review current debt payments, revenue, bank activity, cash flow, and the strength of the new transaction.
If the company has sufficient cash flow, additional financing may be reasonable.
If the existing obligations are already putting pressure on the business, approval may be more difficult.
This is another reason why looking at the complete financial picture matters.
Can You Use Construction Equipment You Already Own to Obtain Working Capital?
In some situations, yes.
If your company owns valuable equipment, you may be able to use that equipment to access working capital through a sale-leaseback or another equipment-backed financing arrangement.
With a sale-leaseback, a financing company purchases eligible equipment from your business and leases it back to you.
Your business continues using the equipment while receiving cash from the transaction.
The funds may help with:
- Payroll
- Materials
- Equipment repairs
- Business expansion
- New projects
- Seasonal cash flow
- Other operating expenses
Qualification generally depends on equipment ownership, available equity, value, condition, and the business’s financial strength.
Not every piece of equipment will qualify.
But for businesses with significant money tied up in machinery, this may be an option worth exploring.
Why Work With a Construction Equipment Financing Broker?
One of the challenges with equipment financing is that lenders do not all follow the same guidelines.
A lender that specializes in strong-credit borrowers may not be the right fit for a construction business with challenged credit.
A lender that finances newer equipment may not be comfortable with an older bulldozer.
Another lender may have a great program for established companies but very few options for startups.
That is where working with a broker can be helpful.
At TheBroker.Finance, I work with multiple lenders that offer different equipment financing programs.
Rather than assuming one lender is the right answer for every borrower, I look at the details of the transaction.
I want to understand what you are purchasing, how long you have been in business, your approximate credit, revenue, and how much money you have available for a down payment.
From there, I can evaluate which financing sources may be worth considering.
The goal is not to submit your application to every lender.
The goal is to identify lenders whose guidelines make sense for your particular situation.
Frequently Asked Questions About Construction Equipment Financing
Can I get construction equipment financing with a 500 credit score?
Possibly.
Some lenders may consider borrowers with credit scores in the 500s, particularly when the business has strong revenue, an established operating history, or a significant down payment.
Approval depends on the complete transaction.
Can I finance an excavator with no money down?
Some well-qualified borrowers may qualify for little or no money down.
However, weaker credit, limited time in business, or older equipment may result in a down payment requirement.
Can a new construction business finance equipment?
Yes, some lenders offer startup equipment financing programs.
Personal credit, industry experience, down payment, and equipment type can be especially important.
Is it harder to finance older construction equipment?
It can be.
Some lenders have equipment age limits, while others are more flexible.
Condition, operating hours, purchase price, and resale value all play a role.
Can I finance multiple pieces of equipment at once?
Yes, depending on the lender and the financial strength of the business.
The lender will generally review the total equipment cost and whether the business can support the payments.
How quickly can construction equipment financing be approved?
Approval time varies.
Some straightforward application-only transactions can receive relatively quick credit decisions.
Larger transactions, challenged-credit applications, private-party purchases, or deals requiring additional documentation may take longer.
An approval is also different from final funding. All documentation and closing conditions must be satisfied before the transaction is completed.
Need Construction Equipment Financing?
If you are looking to purchase new or used construction equipment, I would be happy to review your situation.
Whether you have excellent credit, challenged credit, an established construction company, or a newer business, the first step is understanding the transaction.
You do not need to know which financing program is right for you.
That is what I am here to help you figure out.
When you contact me, it helps to know:
- What type of construction equipment you want to purchase
- The approximate purchase price
- How long you have been in business
- Your approximate monthly business revenue
- Your approximate credit score
- How much money you have available for a down payment
From there, I can help determine which financing options may make sense.
Call or text Shawn at (714) 271-8524 or email Info@TheBroker.Finance to discuss your construction equipment financing needs.
You can also learn more about Equipment Financing and Bad Credit Equipment Financing.
All financing is subject to lender approval, underwriting requirements, documentation, equipment eligibility, program availability, and lender-specific conditions. Financing options and terms vary by transaction.